Value evaluation of mining right based on fuzzy real options

Wei Yang, Nan Fang, Yaping Wang, Tao Long, Sha Deng, Mengge Xue and Bo Deng

Resources Policy, 2022, vol. 78, issue C

Abstract: Value evaluation of mining right is an important driving force to realize the optimal allocation of resources and to promote the sustainable development of the mining economy, but the relevant theoretical methods are not yet perfect. The existing Discounted Cash Flow (DCF) method has the problems of ignoring uncertainty and decision-making rigidity in the evaluation of mining right, while the real option method is a suitable management method for solving large uncertainties and improving decision-making flexibility. In this paper, by establishing a value evaluation model of mining right based on fuzzy real options and combining empirical research, the evaluation results are optimized into a long-term option interval that takes into account the characteristics of the mining cycle of mineral resources. The range includes the evaluation value of DCF method, and also is more concentrated than short mining cycle of mineral resources that ignores the interval range of long-term options, which verifies the feasibility of the model empirically. The model is not only conducive to managers’ flexible decision-making activities, but also to theoretically solving the shortcomings of the existing DCF method in the assessment of the use of mining right as well, thus making the assessment results fairer and more rigorous with its strong operability and applicability. The model enriches and develops theoretical methods for evaluating the value of mining right.

Keywords: Value evaluation of mining right; B–S model; Long-term option; Trapezoidal fuzzy numbers (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:78:y:2022:i:c:s0301420722002665

DOI: 10.1016/j.resourpol.2022.102818

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