Use of Simulation in Valuation Outline for today - MIT
Use of Simulation in Valuation Outline for today - MIT
Use of Simulation in Valuation Outline for today - MIT
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Antam<strong>in</strong>a M<strong>in</strong>e <strong>Simulation</strong><br />
• System Model: NPV <strong>of</strong> Pr<strong>of</strong>it as function <strong>of</strong>:<br />
— ore quality, quantity<br />
— cost <strong>of</strong> m<strong>in</strong><strong>in</strong>g<br />
— value <strong>of</strong> metals (mostly copper, z<strong>in</strong>c and “moly”)<br />
• Distributions <strong>for</strong> Key parameters<br />
— Assumed: Market data as GBM (lattice evolution<br />
from current price <strong>of</strong> metal)<br />
— Estimated: Technical Cost Models (<strong>of</strong> m<strong>in</strong>e ops)<br />
— Guessed: Expert Judgment to be revised by<br />
results <strong>of</strong> exploration (ore quantity, quality)<br />
Eng<strong>in</strong>eer<strong>in</strong>g Systems Analysis <strong>for</strong> Design Richard de Neufville ©<br />
Massachusetts Institute <strong>of</strong> Technology <strong>Use</strong> <strong>of</strong> <strong>Simulation</strong> Slide 15 <strong>of</strong> 17<br />
Antam<strong>in</strong>a M<strong>in</strong>e <strong>Valuation</strong><br />
• Assumed operators could “lock <strong>in</strong>” price <strong>for</strong><br />
metal by long-term contracts over life <strong>of</strong> m<strong>in</strong>e<br />
— Probably not possible <strong>in</strong> fact. However, it is<br />
necessary assumption to know value <strong>of</strong> ore to use<br />
as basis <strong>for</strong> valu<strong>in</strong>g NPV <strong>of</strong> m<strong>in</strong>e over its life<br />
• Value <strong>of</strong> “on” Option = EV(all positive NPV) –<br />
EV(project without option to abandon)<br />
• Value <strong>of</strong> “<strong>in</strong>” Option = further improvements<br />
<strong>in</strong> NPV due to flexibility provided<br />
• See special Antam<strong>in</strong>a slide show<br />
Eng<strong>in</strong>eer<strong>in</strong>g Systems Analysis <strong>for</strong> Design Richard de Neufville ©<br />
Massachusetts Institute <strong>of</strong> Technology <strong>Use</strong> <strong>of</strong> <strong>Simulation</strong> Slide 16 <strong>of</strong> 17<br />
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