Analysis On Mineral Sequential Investment By Real Option

Mineral investment decisions effectively direct the development and utilization of mineral resources,which have a profound impact on the existence and development of mining enterprises.Mineral investment projects possess the investment characteristics of irreversibility,uncertainty,flexibility and competitiveness.Scientific and reasonable investment decisions how to make is the core problem of mining enterprises.Therefore,the purpose of the research is to establish a scientific assessment system of mineral investment project and make optimal investment decisions.Firstly,the paper reviews real option theory,including its origin,classification,pricing,application,and its advantages compared with traditional investment assessment and decision theory.Real option theory has the capacity to assess the value of risk and flexible decisions.And the value of risk and flexible decisions exist in the mineral investment project.Secondly,mineral sequential investment model is built.And the model can make flexible management strategies.On the whole,mineral investment has three stages,including infrastructure and prospecting,mining,processing and smelting investment.And the three-stage investment constitute the investment chain of mineral project.Surface and latent value should be considered in the three-stage investment project when we analyze mineral investment decisions.So the mineral investment project could be regarded as a three-phase process of sequential investment.And the mineral investment decision-making should also be phased.In the process of infrastructure and prospecting,mining,processing and smelting,according to the uncertain factors,investors can make the following decisions: instant investment;delay investment;pause project;rebooting;abandon project.And investors should change decisions from pause project to rebooting when uncertain factors become advantageous.Finally,mineral sequential investment and flexible decision-making model is used by one gold enterprise in Gansu.The conclusions are that the decisions from the model can satisfy the actual requirement of mineral investment and ensure scientificity.The model of three-stage sequential investment makes up for the deficiency of single-stage investment decision.And the model solves the problem that different staged decisions could contact and influence each other.The model provides a more reasonable theory reasons for mineral investment decision-making.The model of flexible decision-making based on real option pricing model,makes mineral investment decisions more scientific and embodies the managerial flexibility.And the model can make mining company obtain benefits under the influence of uncertain factors.