Optimizing Urban Mining Investments: Leveraging Sequential Compound Real Option Analysis for Circular Economy Transition

Mohamed Ben Abdelhamid (), Vanessa Casadella () and Sofiane Tahi ()
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Mohamed Ben Abdelhamid: MIS - Modélisation, Information et Systèmes - UR UPJV 4290 - UPJV - Université de Picardie Jules Verne
Vanessa Casadella: MIS - Modélisation, Information et Systèmes - UR UPJV 4290 - UPJV - Université de Picardie Jules Verne
Sofiane Tahi: MIS - Modélisation, Information et Systèmes - UR UPJV 4290 - UPJV - Université de Picardie Jules Verne

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Abstract: The development of urban mining, specifically in metal recovery from e-waste, is essential for achieving the circular economy. However, difficulties in accessing suitable financing as well as insufficient investment in recycling infrastructures emerge as important barriers. Given the intricate recovery process involving multi-stage investments and diverse inputs, technologies, and uncertainty levels, traditional discounted cash flow methods fail to adequately capture the sequential dynamics of urban mining investments. This paper pioneers the application of real options theory in evaluating investment in metal recovery. The paper includes a case study, offering practical insights into the feasibility of investing in a material recovery facility. The financial analyses reveal substantial value creation from managerial flexibility, evident in the gap between real option and discounted cash flow-derived net present value. The value of circularity, assessed through a complex real option, underscores the importance of adopting innovative financial methods. Findings support the proposition to maximize resource recovery from e-waste, especially through focused printed circuit board processing.

Keywords: Real option; Urban mining; Investment; Metal recovery; E-waste (search for similar items in EconPapers)
Date: 2025-04-16
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Published in Environmental Modeling & Assessment, 2025, ⟨10.1007/s10666-025-10034-0⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05097013

DOI: 10.1007/s10666-025-10034-0

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