Mining Project Investment Evaluation Based On Real Options

Mineral resource as a factor of production and the object of labor, is an important material basis for human survival and development of social economy, it is responsible for people's livelihood. As China's development and utilization of mineral resources projects mergers and acquisitions, equity transfer of mining enterprises transition to a market economy emerge from a planned economy, and increased investment in mineral resources make the value of the issue has attracted much attention, especially how to evaluate and what's method used to assess a mineral resource projects worth being invested. Relative to other investment, mining investment is generally having the following characteristics:great investment scale, high investment risk and long payback period. Besides, in the process of the investment is filled with a lot of uncertainty factors.The article is based on the above background, selected mineral project investment evaluation as the research direction. After an analysis of the risk of project investment decisions and the characteristics of mineral resources, believed that traditional evaluation methods due to not consider that these uncertainties of mining investment projects, which primarily focus on the value of the cash flow itself made by projects, while lack of a proper assessment to the market value of them, make the assessment results cannot be accurate and reasonable. After described the real options method, thought it is more suitable for evaluating mineral projects'investment value. This paper described the method to mineral project investment evaluation, and selected F Mining Company as an example, then amends the main economic parameters of the original income approach, and revalues, finally on the basis of the real option, using the binary tree model into a revaluation, hoping that will as a reference to the mineral projects investment evaluation.Through calculation, F mining company income approach amended value was 465million Yuan,177 Yuan more than the old value, the difference was due to the WACC of F Mining Company had reduced.; and then using the binary tree model into a revaluation, which was worth of 648 million Yuan at the evaluation base date, the evaluation result was 183million Yuan more than the correction result of income approach, which brought the option value of uncertainty factors are included.