A novel risk-adjusted discount rate methodology for mine economic evaluation – a case study. (5th January 2023)

• Record Type: Journal Article
• Authors: Gyebuni, Richard; Ziggah, Yao Yevenyo; Mireku-Gyimah, Daniel
• Is Part Of: International journal of mining and mineral engineering. Volume 13:Number 2(2022)
• Page Start: 162
• Page End: 184
• Publication Date: 2023-01-05
• Subjects: discount rate -- fuzzy analytical hierarchy process -- FAHP -- net present value -- NPV -- cashflow analysis; Mining engineering -- Periodicals; Mines and mineral resources -- Periodicals; 622.05
• Languages: English
• ISSNs: 1754-890X

Abstract

Though several investment decision criteria are available for carrying out mine economic evaluations, the net present value (NPV) is most commonly used. However, one significant challenge of NPV criterion is the conventional assumption of the discount rate as input parameter. To obtain a more realistic discount rate, this study proposes that all significant risk factors peculiar to a particular mineral project must be investigated. To this end, ten risk factors of the Mpeasem Gold Project in Ghana were identified. The risk factors were quantified using a modified fuzzy analytical hierarchy process (FAHP) with extent analysis method. The result of the FAHP analysis gave a risk-adjusted discount rate of 11.93% as against the determined conventionally assumed discount rate of 15% based on prevailing fiscal conditions of Ghana. The obtained NPV for the FAHP gives more confidence to the investor in making the accept-reject decision.