Valuing Resource Investments

Kenneth Clements and Liang Li
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Liang Li: Business School, University of Western Australia

No 14-27, Economics Discussion / Working Papers from The University of Western Australia, Department of Economics

Abstract: The Millennium Boom of 2003–2011 made the resources industry hugely profitable and led to a surge in new projects around the world. This had major implications for the Australian economy: resource investment accounted for almost half of all business investment at the peak, the capitalisation of resource companies as a group surged by approximately 50% relative to the market, and the buoyancy of the sector helped Australia to avoid the worst of the global financial crisis. This paper examines the wealth-creating effects of new resource projects at the individual company level. Results show that substantial increases in shareholder returns occurred around the time of announcements of government approval for projects, the finalisation of feasibility studies, and changes in the status of projects such as when a company committed to invest in a project. This capital-market approach seems to be a viable alternative to conventional ways of valuing resource projects.

Pages: 46 pages
Date: 2014
New Economics Papers: this item is included in nep-ppm
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Citations: View citations in EconPapers (6)

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