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Title: Valuation of mineral-linked assets : a contingent claim approach in the bauxite/aluminium industry
Author: Lowe, David F.
ISNI:       0000 0004 2678 427X
Awarding Body: The University of Manchester
Current Institution: University of Manchester
Date of Award: 2008
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This thesis is about the interface between theoretical and empirical practice in the evaluation of mineral asset investments. It takes the Jamaican Bauxite industry as a case study for applying a real option model for estimating the value of managerial flexibility in the context of the pre and post development stages ofa mine. The thesis begins from the position that classic DCF calculations understate the value of real options embedded in the mineral industry. To evaluate these options, this thesis replicates and extends the work of Trigeorgis (1996) by applying the model and method to an actual mineral study rather than an hypothetical case. It contributes by further explaining the non-additivity of options, and it compares alternative binomial models, investigating their properties and limitations, including convergence and accuracy ofthe numerical results. The thesis also briefly compares theory with practice. ill common with studies ofother industries (Davis, 1996), we find that mining firms in the bauxite industry use classical valuation methods of evaluation such as DCF. However, recent decisions in the Jamaican bauxite industry suggest that the mining firms make decisions which are either irrational, if based on classical valuation techniques, or can be explained by the implicit inclusion of some combination of real options (as in our case study) or by unrevealed terms negotiated with the host government.
Supervisor: Not available Sponsor: Not available
Qualification Name: Not available Qualification Level: Doctoral
EThOS ID:  DOI: Not available