Opening mines under the risk of geoeconomic fragmentation: a real-option approach

Mouez Fodha (), Aude Pommeret () and Francesco Ricci ()
Additional contact information
Mouez Fodha: UP1 - Université Paris 1 Panthéon-Sorbonne
Aude Pommeret: IREGE - Institut de Recherche en Gestion et en Economie - USMB [Université de Savoie] [Université de Chambéry] - Université Savoie Mont Blanc, USMB [Université de Savoie] [Université de Chambéry] - Université Savoie Mont Blanc, OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po
Francesco Ricci: CEE-M - Centre d'Economie de l'Environnement - Montpellier - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - UM - Université de Montpellier

Post-Print from HAL

Abstract: This article examines the economic rationale for opening new mines to extract critical raw materials (CRMs) in Europe, in search of strategic autonomy. We use a real-option framework to analyse a government's decision on the optimal timing of such an investment, taking into account mineral prices and domestic economic activity. The model incorporates geoeconomic fragmentation risk as a source of uncertainty that materializes as jumps in CRM prices. While uncertainty would be expected to delay the start of mining operations, our results show that a countervailing effect also exists, which increases the expected value of the developed mine. Furthermore, we show that the development of recycling does not clarify whether advancing extraction is ultimately socially desirable, underscoring the ambiguous theoretical implications of an expanding supply of secondary materials.

Keywords: mining industry; critical raw materials; real options; geopolitical risk; geoeconomic fragmentation; recycling (search for similar items in EconPapers)
Date: 2026
Note: View the original document on HAL open archive server: https://hal.science/hal-05717731v1
References: Add references at CitEc
Citations:

Published in Oxford Review of Economic Policy, 2026, 42 (1), pp.131-143. ⟨10.1093/oxrep/grag013⟩

Downloads: (external link)
https://hal.science/hal-05717731v1/document (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05717731

DOI: 10.1093/oxrep/grag013

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().