Coal-Mine Liquidation as a Strategic Managerial Decision : a Decision-Making Model Based on the Options Approach

Tomasz Jewartowski , Jacek Mizerka , Cezary Mróz

Abstract

The aim of this paper is to determine the optimal time of coal mine liquidation given the necessity of bearing the costs of post-mining reclamation. In order to consider the volatility of parameters important for making a liquidation decision and the entrepreneur's flexibility in the decision-making process, the real options approach was applied. Mine liquidation, which is inextricably linked to post-mining reclamation, is examined as an American put option on the market value of continuing the mine's operation which plays the role of the underlying asset. In turn, the role of the exercise price is played by expenditures for mine liquidation and post-mining reclamation, which can be avoided if the decision to close the mine is taken before all the deposits are exhausted. The liquidation option is exercised when the value of liquidation and reclamation cost savings significantly exceeds the continuation value. Mine liquidation was additionally made conditional on the value of funds accumulated to finance post-mining reclamation
Author Tomasz Jewartowski (WZ / KFP)
Tomasz Jewartowski,,
- Department of Corporate Finance
, Jacek Mizerka (WZ / KFP)
Jacek Mizerka,,
- Department of Corporate Finance
, Cezary Mróz - Joyglobal Poland SP Zoo
Cezary Mróz,,
-
Other language title versionsLikwidacja kopalni jako strategiczna decyzja menedżerska: model decyzyjny z wykorzystaniem podejścia opcyjnego
Journal seriesArchives of Mining Sciences, ISSN 0860-7001, (A 20 pkt)
Issue year2015
Vol60
No3
Pages697-713
Publication size in sheets0.8
Keywords in Polishreclamation of the post-mining area; real options approach; financial calculus in mining
Keywords in Englishdecyzja o likwidacji kopalni i rekultywacji terenów pokopalnianych; podejście opcyjne; opcja likwidacji kopalni; fundusz na rekultywację terenów pokopalnianych
ASJC Classification1906 Geochemistry and Petrology; 1909 Geotechnical Engineering and Engineering Geology
DOIDOI:10.1515/amsc-2015-0046
URL https://content.sciendo.com/view/journals/amsc/60/3/article-p697.xml
Languageen angielski
Score (nominal)20
Score sourcejournalList
ScoreMinisterial score = 14.0, 23-12-2019, ArticleFromJournal
Ministerial score (2013-2016) = 20.0, 23-12-2019, ArticleFromJournal
Publication indicators WoS Citations = 0; Scopus SNIP (Source Normalised Impact per Paper): 2015 = 0.717; WoS Impact Factor: 2015 = 0.448 (2) - 2015=0.519 (5)
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