Mining Investment Research Articles

The financial feasibility analysis for construction plan of ferro-nickel (fe-ni) smelter plant at South Konawe Regency, South East Sulawesi

The objective of the study is to comprehend the feasibility for construction plan of smelter plant to process the nickel laterite into ferro-nickel (Fe-Ni). PT. Macika Mineral Industries (PT. MMI), located at Lolowua village South Konawe, Southeast Sulawesi will implement such a plan Law No. 4 of 2009 on Mineral and Coal Mining obliges the mining investors to process the minerals into semi-finished or finished products in the domestic country before selling them abroad. The raw materials for PT. MMI smelter plant will be supplied by PT. Macika Mada Madana (PT. MMM) as one of PT. MMI group members PT. MMI is the holder of Production Operation Mining Permit that covers an area of 705 Ha and is located in Watudemba village, Palangga District and Keono Village, South Palangga District, South Konawe Regency. The mining area of PT. MMI is located 7 km from the PT. MMM planed plant. The total Ni reserve owned by PT. MMM is 18,930,700 tons. Of 18,930,700 ton reserves; 4,390,645 tons belongs to the measured one performing the average grade of nickel and iron around 1.97 and 23.14% respectively while around 14,540,055 tons that contain the average grade of nickel and iron about 1.92 and 23.14% respectively goes to the inferred reserve. PT. MMI requires 960,000 tons per year of Ni raw material it means that PT. MMM can supply the processing plant up to 20 years. Net present value (NPV), internal rate of return (IRR), return on investment (ROI), payback period (PBP), benefit cost ratio (B / CR), and breakeven point (BEP) are the criteria for evaluating the financial need of PT. MMI. The results showed that the NPV was about US$ 726,883,479 while the IRR and the ROI were around 18.00% and 212.90% respectively. Calculating the PBP and the B/C achieved 6.19 years and 3.21 correspondingly. The reached BEP was US$ 754 per ton for the production of 50,504 tons. The analysis showed that the construction of ferro-nickel (Fe-Ni) plant by PT. MMI was financially acceptable to be. However, using several variable measurements in analyzing the sensitivity of the business, namely by the selling price of ferro-nickel is assumed to be reduced by 5% and production cost is increased by 5%, the plan is not sensitive to decreasing selling price and increasing production cost.

Mineral development for growth: the case for a new mineral policy framework for Pakistan

PurposeThe fundamental purpose of this research is to compare Pakistan’s mineral policy instrument with that of leading developing minerals-based economies and to highlight the gaps. Mineral resources development can act as an engine for country growth and have the potential to transform economies and societies. The extent to which such transformation takes place varies depending upon the method of their use.Design/methodology/approachThis paper conducts a gap analysis between Pakistan and leading developing minerals-based economies to identify key policy gaps. Two basic principles were kept in mind with the choice of countries: first, only developing countries were considered and, second, at least two countries had to be Islamic. Eight developing countries Chile, Mexico, Brazil, Peru, India, South Africa, Kazakhstan and Turkey were selected.FindingsThe most important finding of the exercise is that Pakistan’s mineral sector is lacking an enabling institutional, fiscal and regulatory framework for the optimal development of its mineral resources.Practical implicationPakistan’s mineral resources have the potential to expand its economy and benefit its citizens. For this to happen, Pakistan must first establish what beneficiation is realistically expected from its mineral resources and, second, formulate a mineral policy based on leading practices to attract mining investment and aim for a sector contribution to gross domestic product of 5 per cent.Originality/valueThis paper presents original work on how Pakistan should formulate its mineral policy to extract maximum benefit from its mineral resources.

Evaluating Investment Risks of Metallic Mines Using an Extended TOPSIS Method with Linguistic Neutrosophic Numbers

The investment in and development of mineral resources play an important role in the national economy. A good mining project investment can improve economic efficiency and increase social wealth. Faced with the complexity and uncertainty of a mine’s circumstances, there is great significance in evaluating investment risk scientifically. In order to solve practical engineering problems, this paper presents an extended TOPSIS method combined with linguistic neutrosophic numbers (LNNs). Firstly, considering that there are several qualitative risk factors of mining investment projects, the paper describes evaluation information by means of LNNs. The advantage of LNNs is that major original information is reserved with linguistic truth, indeterminacy, and false membership degrees. After that, a number of distance measures are defined. Furthermore, a common status is that the decision makers can’t determine the importance degrees of every risk factor directly for a few reasons. With respect to this situation, the paper offers a weight model based on maximizing deviation to obtain the criteria weight vector objectively. Subsequently, a decision-making approach through improving classical TOPSIS with LNNs comes into being. Next, a case study of the proposed method applied in metallic mining projects investment is given. Some comparison analysis is also submitted. At last, the discussions and conclusions are finished.

South–South relations under world market capitalism: the state and the elusive promise of national development in the China–Ecuador resource-development nexus

ABSTRACTOptimistic commentators welcome ‘the rise of the South’ as a phenomenon that will transform geopolitical architectures and development thought. This essay situates this alleged rise and ‘South–South relations’ within world market capitalism and discusses their liberating potential with a case study of Chinese mining investment in Ecuador. Despite the ostensibly differing approaches to development embodied in the Chinese and Ecuadorian alternatives to neoliberalism, the Mirador project reveals eerily familiar outcomes, dominated by visions of national modernization and business-state alliances that reproduce market inequalities and postcolonial exclusions. While the Mirador project grants significant economic clout to pursue development through redistributive means, it also attests to the role of the state in opening new market frontiers and securing conditions for transnational capital accumulation. I argue that in this context and similar ones, it is problematic to project the attributes of the South as a symbol of struggle for emancipation on to the nation-state. Although the South remains a useful concept, it should be understood as a space made up by those who are subject to diverse forms of oppression in the name of globalization and national development – a space that is reshaped by the works of the state in multiple and often contradictory ways.

Rural livelihoods, large-scale mining and agrarian change in Mapela, Limpopo, South Africa

This paper forms part of the growing body of scholarly research that seeks to understand the impacts of extractive activities on local and indigenous communities. The paper examines the socio-economic impacts of large-scale mining activity on rural livelihoods in four villages (Armoede, Ga-Chaba Ga-Molekana and Skeming) in the Mapela traditional authority area where Anglo Platinum’s Mogalakwena mine is operating. Of these four villages, only Armoede residents were relocated while the other three villages remain within the proximity of the mine. As a result of co-habitation and proximity to production, the three villages also highlight another important dimension of mining-induced displacement and resettlement whereby mining activities encroach on the livelihoods of surrounding villages. Rural households in the Mapela area have traditionally relied on both agricultural and non-agricultural sources of income, often straddling urban and rural locales, in highly diversified livelihood systems for both survival and accumulation purposes. The establishment of large-scale mining investments in peripheral localities may be seen as constituting part of the mediating processes between the households and the wider socio-economic context which may enhance or diminish their livelihood assets or endowments. Findings from this research reveal that mining-related land dispossessions have had adverse impacts on land-based and agrarian livelihood activities namely, homestead garden cultivation, ploughing in large fields and livestock rearing. This happens within the context of limited non-farm livelihood opportunities, especially wage employment, both locally and in the wider economy. In this sense, large-scale mining investment disrupts the local livelihood system, intensifying the crisis of social reproduction amongst local rural households and limiting their ability to accumulate, especially from agriculture. This raises critical questions about the role and place of agricultural forms of livelihood in the contemporary capitalist world where the historical role of industrial growth as a means of eradicating poverty has also become highly uncertain.

Risk of commodity price, production cost and time to build in resource economics

Real option theory has been extensively applied to natural resource extraction modeling and risk management, which proves to be a significantly more powerful method than the traditional ones such as discounted cash flows. This research attempts to extend a proposed real option model based on optimized price threshold strategy for gold mining operations. Besides exploring the risk from commodity price, the research also examines the effects of a declining stochastic production costs, due to technology innovation in the long term. The extended real option model further examines how the time to build a gold mine can impact the optimized price threshold strategy. Sensitivity analysis and numerical evidence show that, (1) innovation in mining technology will boost the mine’s profitability and also shift the optimized price threshold; (2) mining operators can hedge a significant level of risk by treating time to build properly. Further discussions are provided on mining investment strategy and policy implication for resource extraction.

Analysis of Bonds as an Instrument for Financing Mining Investments

Abstract The purpose of this article is to examine the structure of financing for mining enterprises in the years 2007-2013, with particular emphasis on bonds. The document pays special attention to Polish mining enterprises. The financing structure analysis was based on data collected from financial statements (cash flows) of the largest mining companies in Poland, and their comparison with the results of global mining enterprises pursuant to reports prepared by international advisory firms. The article takes into account capital sources such as: corporate bonds, bank loans and issue of shares. As indicated by the performed analysis, mining enterprises both around the world and in Poland are increasingly eager to take advantage of obtaining business financing from issue of corporate bonds. It should also be recognized that in the analyzed period, both global and Polish mining enterprises deviate from forms of financing such as issue of shares. This may be caused by the fact that the bonds market in Poland is becoming increasingly popular, mainly due to interest rate on bonds being lower in comparison with bank loans. Another reason may be that banks and potential buyers of shares are less eager to finance this type of investment due to a relatively substantial risk acceptable to bondholders.

Strategy Planning For the Mining Industry in Semnan Province (Iran) Using A Combined SWOT-AHP Approach


 
 Abstract— In today's world, the type of investment, prioritization and scheduling the extraction of mineral resources due to the constraints of resources, technologies and human resources, etc. strongly requires a strategic planning appropriated in this area. In terms of quantity and quality, the resources and mines in Semnan province would be seen among the richest mineral resources in Iran. However, due to a scarcity of compiled strategic planning in the mining industry, this prominent province plays a small role in the country's economic developments. In this regard, the exploration and evaluation of the strategic factors and a formulation of strategies seems to be vital. In this study, the analysis and formulation of the demanding strategy have been done by applying the strategic management approach SWOT (Strengths, Weaknesses, Opportunities and Threats). Then the resulting strategies have been prioritized by using a hierarchical multi-criteria decision analysis called AHP (Analytic Hierarchical Process). Three strategies: creation of industrial clusters in the field of handicraft production with raw materials of mud, clay and gypsum panels (S3), joint mineral investments with the other mines of the province (S8), and the creation of groundwork for the mineral production cooperative companies, gained the highest priorities. Three strategies: updating the existing coke-making companies and constructing small coke-making and coal-washing units (S5), forming the specialized, industrial, mining, strategic and advisory committees in the Semnan Provincial Government to facilitate the local laws and encourage investments in mining (S7), and a greater engagement of private sectors with the government (activate the role of mining engineering and a maximum participation in decision-making related to the industry of the province) gained the least priority. At last, using prioritized strategies, some systematic planning is chosen strategically to suit the current situation, and to make possible a development and utilization of the high potential capacities in the mining industry which are already provides in Semnan province.
 Index Terms— mining industry, SWOT Analysis, Hierarchical Analysis, Semnan province.

On the trade-off between the leverage effect and real options thinking: A simulation-based model on metal mining investment

This paper studies the effects of financing conditions to managerial flexibility and project value and focuses on the point of view of the equity holder of a mining company. Simulation based analysis is performed with a dynamic system model of a metal mine investment. The leverage effect of the equity holder's discount rate change as a function of the debt/equity ratio is separately modelled. Our empirical results show that the choice of a financing structure is important for the value maximization for the equity holder, since different debt/equity ratios differently condition the management's ability to make operational decisions, such as temporary shut downs, which could raise the value of the mining project. The trade-off between the leverage effect (decreasing need for equity) and real option flexibility (increasing need for working capital) will be scrutinized both theoretically and by using simulation-based analysis for numerical results.

The golden ‘salto mortale’ in the era of crisis

As formulated by Marx ([1867] 1990. Capital. Vol. I. London: Penguin, 200), ‘the leap taken by value from the body of the commodity into the body of the gold is the commodity’s salto mortale’. Following autonomous Marxist literature (De Angelis 2007. The Beginning of History: Value Struggles and Global Capital. London: Pluto Press; Federici 2011. ‘Feminism and the Politics of the Commons.’ The Commoner, other articles. Accessed January 28, 2017, http://www.commoner.org.uk/?p=113; Hardt and Negri 2009. Commonwealth. Cambridge, MA: Harvard University Press), the circulation of capital could be interrupted by social, class, gender or ecological struggles. In order to unsettle this view, we build on recent critical scholarship on new enclosures, land-grabbing and the permanence of primitive accumulation and we explore the inter-articulation of gold mining projects and neoliberal policies in the era of crisis. In this effort, we examine the case of Greece, a country at the epicenter of the recent financial and social crisis. During the last decade, the Canadian company Eldorado has undertaken a gold mining investment in the environmentally sensitive area of Skouries. A fruitful social struggle has emerged against this project, both in the rural site and in the urban Greek metropolis. Through this examination we investigate how the financial crisis provides an opportunity for multinational mining corporations to expand their zones of exploitation and how social resistance can reclaim common resources.

Rare earth elements mining investment: It is not all about China

China was in the past the main driver when analysing rare earth prices and their market, since it commercialised around the 90% of the world's supply. After a cut in its exports during 2010 and 2011, rare earth prices dramatically spiked. The world's reaction to this fact was the development of a huge amount of mining projects outside China, many of whom failed when prices fell again. Nevertheless, several of them survived.This paper analyses in first place the future trend of rare earth elements prices in order to contrast the stable tendency forecasted by different providers of price assessments and market data. Secondly, it studies in deep five ready-to-go rare earths mining projects around the world: Nechalacho Project (North-west Territories, Canada); Zandkopsdrift Project (Northern Cape, South Africa); Bear Lodge Project (Wyoming, USA); Kvanefjeld Project (Southern Greenland); and Dubbo Zirconia Project (New South Wales, Australia). The main purposes being to give an “order of magnitude” both technical and economic of this specific mining industry; to provide a tool for investors, potential investors and professional advisers addressing rare earth mining investment analysis; and to facilitate the development of preliminary economic assessments of future rare earth mining projects. These aims will also help to fight against several systemic problems of the rare earth market: lack of trust, market opacity, and short versus long-term approaches and profit orientation.Conclusions clearly show that despite the complexity of rare earth mineral deposits and the fact that their mining operation usually includes different by-products, the evaluation of rare earth mining investments does not present much more difficulty than in the case of single element mining projects. Forecasted prices used in these economic studies are the Achilles’ heel of nowadays rare earth mining investment analysis.Finally, although differences in demand of different rare earth elements will make really difficult to achieve “a priori” a market in balance, the five studied projects are anticipated to cover approximately the third part of the total rare earth consumption in the world. When their dysprosium oxide production was analysed, the resulting proportion for the most critical rare earth element based on its role in clean energy together with its biggest supply risk was almost the same, something optimistic regarding the achievement of a balanced market outside China.

Assessing the timing of mining investment under tax policy uncertainty: the case of the Asia-Pacific region

Mining involves the discovery, extraction, and processing of non-renewable resources. The potential of mining revenues to contribute to national economic development is well known, but the allocation of mineral wealth and the concern of increasing resource scarcity have become issues of debate in the mining industry. The purpose of this study is to introduce the binomial decision tree analysis, which is a new approach to mining investment decisions. The examples used examine the impact by a policy change. Using three mining projects in the Asia-Pacific, in Australia, Indonesia and Papua New Guinea, findings about options for the investor suggest it is sometimes better to wait for a more suitable time to invest. Using such knowledge provides the potential to change the investment climate in mining.

The peril and promise of resource nationalism: A case analysis of Mongolia's mining development

Resource nationalism is often cited as the most serious risk to foreign mining investment in developing countries. Mongolia provides an important case study of studying this phenomenon and its impacts, especially during the global mining boom years from the late 1990s to 2010. This phenomenon has been exposed mainly through the ever increasing role of state ownership in major mineral deposits, mostly by direct equity participation. The rationale behind these nationalist policies is to maximize the economic and political benefits from extractive industries. However, in reality, the Mongolian government lacks financial and human resources as well as practical knowledge to engage directly in mega projects which pose substantial risks, if carried out improperly. The aim of this paper is to examine the underlying nature of the state-centric resource development model in Mongolia. Using an institutionalist approach, the study provides a systematic understanding of the root causes for the growing state involvements in mineral resource development, and its implications for and implementation upon the Mongolian mining sector, including major challenges encountered as a result of the dominant ownership structures shaping the industry.

Persian Mining Product (PMP) Is Future of Iranian Minerals Branding

Abstract— This electronic document is browsing across history of Iranian minerals export to clarify the key factors which helped to achieve the success or loose the chance on the subject. Iran with great reserve of minerals which consisting of 68 types has a great potential to substitute minerals export income instead of oil. This is the same scenario that Kingdom of Saudi Arabia also is planning to do so.
 To achieve this goal, need more attention and focus on mining activities such as exploration, extraction, production, processing of ore as well as export. During a last decade which Iran imposed under tremendous and hard European and United States sanctions, had less chance and hope to follow up this plan. But since beginning 2016 which the most of trading and business sanctions have been removed, Iran not only can equip its mines by brand new machinery and technology but may get much better interest from foreign mining companies and investors to do finance or invest as FDI (Foreign Direct Investment) in Iranian mines.
 Iran needs by proper planning increase share of GDP for mining production from some existing figure below 1% to above 5% to rely less on oil income, which has already had a share of 23% in Iran’s GDP.
 We believe to bypass this road need to create a professional brand for Iranian minerals. Hereby we are introducing for the first time a new abbreviation for branding of Iranian minerals named PMP (Persian Mining Product) as a solution for this purpose.

Maximizing the impact of mining investment in water infrastructure for local communities

Mining activities requiring the development of new or expansion of existing water infrastructure provide an opportunity to benefit local communities with limited access to clean water. Mining companies have commonly assisted water service provision to communities as part of their mining concession or through corporate social responsibility programs. In addition to the water infrastructure provided to local communities, the accompanying capacity building, infrastructure governance, and the consultation process all have notable impacts not only on the sustainability of the water infrastructure, but also the level of benefit to communities. Using recent Australian Government funded water and sanitation interventions along the Nacala Economic Corridor (Mozambique) as a case study, we provide an examination of how mining companies can most effectively ensure the delivery of sustainable water infrastructure to local communities.

Determinants of country competitiveness in attracting mining investments: An empirical analysis

This study contributes to the debate on the competitiveness of countries to attract mining investments. The specific objectives of this work are: to bring empirical support to the alternative view of mining competitiveness, which highlights the key role of country's investment climate; and to propose a methodology, based on cross-country econometric models and the economic theory, to understand how the geological potential and the investment climate interact to define country's mining competitiveness.The research show that long-term mining competitiveness is not solely determined by the geological potential of countries. The models corroborate that both, geological potential and investment climate, are crucial to explain country's attractiveness. Moreover, the results suggest that the relationship of these two variables is not developed individually and additive, but through an interaction of both terms.Finally, the study identifies an “investment climate threshold area” in its final model. Mining competitiveness of countries with low investment climate depend on the interaction between their geological potential and investment climate. On the other hand, countries above this threshold compete for mining funds almost exclusively based on the mineral endowment of their territories. These findings could have relevant consequences in country's strategic decisions for the mining industry.

Towards sustainable mining (part II): Accounting for mine reclamation and post reclamation care liabilities

Valuation of mining investment opportunities typically focuses on revenues (i.e., amount of ore, mineral grade, and commodity prices), pre-production capital expenditures (CAPEX), and recurring operating expenditures (OPEX). Less emphasis is generally placed on longer-term costs that are harder to quantify, such as decommissioning, closure, and reclamation. Less emphasis still is placed on valuation of the very long term (or perpetual) costs of post-reclamation care (PRC) and long-term management (LTM) that should follow mine closure and reclamation, primarily due to technical and environmental uncertainties and the widespread practice of discounting, which renders the present value of distant future costs virtually nil particularly when typically high discount rates are used. Following on from the discussion of mine asset valuation in Part I (Espinoza and Rojo, 2017) of this two-part dissertation on sustainable mining, Part II discusses the inherent issues with the current practice of valuing project opportunities and accounting for PRC liabilities and LTM within the mining sector. The paper argues that mining sustainably starts with recognizing all potential future liabilities (routine and non-routine) through the life of a mine, ensuring that sufficient funds are available to address these liabilities, and investing these funds appropriately. Decoupled net present value (DNPV) analysis, which separates risk from the time value of money and treats risks as a cost to the project, is presented as a robust alternative to current accounting practices. This method can identify the effects of individual risk factors on the value of a project. A hypothetical example taken from the mining literature is used to compare the DNPV method with net present value (NPV) and modern asset pricing (MAP) analysis, and clearly illustrates the unsustainable consequences of using risk adjusted discount rates to value long term mining investments.

Towards sustainable mining (Part I): Valuing investment opportunities in the mining sector

Reliance on classical valuation methods such as the net present value (NPV) has often resulted in controversial asset valuations in the mining sector. An alternative method, termed decoupled net present value (DNPV), is used to evaluate mining investment opportunities. The proposed valuation method decouples the time value of money from the risk associated with the project providing a consistent valuation method free from the problems typically associated with the application of NPV. Market risks (e.g., commodity prices, foreign exchange) can be systematically combined with non-market risks (e.g., effect on operations of climate change and/or large earthquakes). More importantly, DNPV allows seamless integration of project risk assessment performed by technical experts and risk management implemented by business executives into the financial evaluation of the project. A simplified mining investment project is analyzed using traditional techniques and compared with the proposed DNPV. The example includes a discussion about how valuation is affected by climate change and earthquake risks, and how investment in resilience and adaption can be incorporated in the proposed analysis.

A safer bet? Evaluating the effects of the Extractive Industries Transparency Initiative on mineral investment climate attractiveness

The Extractives Industries Transparency Initiative (EITI) is a governmental initiative focused on improving transparency and accountability within resource-rich countries. Given EITI implementation is entirely voluntary, and time and resource intensive in nature, demonstrating the benefits of implementation for participating countries is important to the initiatives long term success. Using panel data for 167 countries from 2003 to 2014, this article analyses the impact of EITI implementation on a country’s mineral investment attractiveness, represented here by the amount of grassroots corporate mineral exploration expenditure within a country. The results suggest that EITI implementation does have a statistically significant positive impact on a country’s ability to attract mining company investment.

Using a cycle reverting price process in modeling metal mining project profitability

PurposeThe purpose of this paper is to demonstrate how managerial estimates of long-term market price trends can be included into investment analysis of metal mining. The inclusion of subjective market information with a new cycle reverting price process is proposed.Design/methodology/approachSubjective managerial estimates are included into stochastic metal price modeling by defining separately the following parameters of each price cycle phase: approximated length, approximated long-term price level and volatility. An net present value-based investment analysis model is applied together with Monte Carlo simulation.FindingsIt is plausible to combine managerial estimates about metal price trends and cycles with stochastic modeling for shorter term and to include the information into investment analysis. The results show that the difference between the proposed process and the commonly used mean reverting process is remarkable in terms of decision-making implications.Originality/valueThe proposed method allows the inclusion of more relevant information into the metal price modeling used in mining investment analysis. Results suggest that the cyclical nature of metal prices affects project value of metal mining projects, and it should be considered when making irreversible investment decisions. The proposed method can be generalized for any cyclical processes.