An option-value framework for valuing mining streams

Abstract

This paper introduces an option-value framework for valuing mining streams. A stream has the same economic characteristics as a portfolio of European call options. Since a stream can be replicated with a portfolio of European call options, the option-value approach to valuing streams is correct. At the same time, there are reasons to use a simpler alternative to the Black-Scholes Model. This paper provides a simple option-value equation for valuing streams.