Real options decision framework: Strategic operating policies for open pit mine planning

Inthavongsa, Inthanongsone; Drebenstedt, Carsten; Bongaerts, Jan C.; Sontamino, Phongpat

doi:10.1016/j.resourpol.2016.01.009

Cited by 20 publications

(12 citation statements)

References 26 publications

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“…By contrast, ROA Sustainability 2019, 11, 1857 3 of 18 is accepted as a theoretically superior tool compared to traditional approaches when irreversibility, uncertainty, and managerial flexibility come into play [31][32][33]. It can help capture optimal investment timing according to changes caused by uncertainties [34,35].…”

Section: Investment Valuation Methods Of Ppp Projectmentioning

confidence: 99%

Investment Valuation Model of Public Rental Housing PPP Project for Private Sector: A Real Option Perspective

et al. 2019

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Public rental housing (PRH) in China is mainly invested by the government at present. The huge capital demand brings it great pressure and a series of problems appear meanwhile. Public–private partnership (PPP) has been regarded as a way to solve the funding dilemma of PRH. However, the PRH project is not attractive for the private sector since the expected profit seems unsatisfactory based on traditional valuation methods. To improve this situation, this paper proposed an investment valuation model from a real option perspective. For the private sector, three types of options, including deferral option, abandonment option, and expansion option, were identified during the concession period of a PRH PPP project. On this basis, a two-stage binomial tree model was constructed for estimating the investment value. Then, the proposed model was tested in a hypothetical example of a typical PRH PPP project in Chongqing, China. The result shows that great potential value can be excavated through flexible strategies and adaption to uncertainties. This paper provides a deep analysis on the gaps of the real option application in public housing investment assessment, which is meaningful for improving the supply efficiency and financial sustainability of PRH.

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Section: Investment Valuation Methods Of Ppp Projectmentioning

confidence: 99%

Investment Valuation Model of Public Rental Housing PPP Project for Private Sector: A Real Option Perspective

et al. 2019

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“…The use of system dynamics methodology allows building a compounded, close-to-reality representation of the mining operation that is still easy-to-read and modify compared to writing the model as software code. Detailed SD feasibility models of mining have been introduced in the literature by, e.g., Inthavongsa et al (2016), Savolainen et al (2017), who showed the flexibility of the approach and its ability to cope with complexity.…”

Section: Cash Flow Modulementioning

confidence: 99%

Maintenance optimization for a multi-unit system with digital twin simulation

Savolainen

Urbani

2021

J Intell Manuf

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Optimization of operations and maintenance (O&M) in the industry is a topic that has been largely studied in the literature. Many authors focused on reliability-based approaches to optimize O&M, but little attention has been given to study the influence of macroeconomic variables on the long-term maintenance policy. This work aims to optimize time-based maintenance (TBM) policy in the mining industry. The mine environment is reproduced employing a virtual model that resembles a digital twin (DT) of the system. The effect of maintenance decisions is replicated by a discrete event simulation (DES), whereas a model of the financial operability of the mine is realized through System Dynamics (SD). The simultaneous use of DES and the SD allows us to reproduce the environment with high-fidelity and to minimize the cost of O&M. The selected illustrative case example demonstrates that the proposed approach is feasible. The issues of using high dimensional simulation data from DT-models in managerial decision making is identified and discussed.

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“…SD models provide a promising approach in this sense, although they have not yet been widely applied to incorporate environmentally driven source of uncertainty. SD models are generally used for evaluating complex real investments by means of non-linearity and feedback loop structures (Forrester 1994;Inthavongsa et al 2016;Johnson et al 2006;O'Regan and Moles 2006;Tan et al 2010). Größler et al (2008) discussed the use of SD models in the operations management context.…”

Section: Introductionmentioning

confidence: 99%

Incorporating Hydrologic Uncertainty in Industrial Economic Models: Implications of Extreme Rainfall Variability on Metal Mining Investments

2019

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Water balance uncertainties have long been known to lead to potential environmental hazards, but their effect on economic profitability of mines is an under-studied field of research. Historical rainfall data are analyzed using the extreme value theory (EVT) and the peak over threshold method (POT). The resulting distributions are used as inputs into a system dynamics techno-economic metal mining investment profitability model, and simulation analysis is performed. The proposed methodology incorporates rainfall extremes and uncertainty into techno-economic modeling of metal mining operations. A case study with real-life historical rainfall data was used to illustrate the relationship between hydrologic uncertainty and the economic value of a metal mining investment.

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Real options decision framework: Strategic operating policies for open pit mine planning

Cited by 20 publications

References 26 publications

Investment Valuation Model of Public Rental Housing PPP Project for Private Sector: A Real Option Perspective

Investment Valuation Model of Public Rental Housing PPP Project for Private Sector: A Real Option Perspective

Maintenance optimization for a multi-unit system with digital twin simulation

Incorporating Hydrologic Uncertainty in Industrial Economic Models: Implications of Extreme Rainfall Variability on Metal Mining Investments

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