306031 (v.1) WASM Resource Sector Finance 602

Area:

WASM Mineral Economics Teaching Area

Credits:

25.0

Contact Hours:

32.0

Lecture:

8 x 4 Hours Fortnightly

Anti Requisite(s):

10945 (v.3) WASM Project Evaluation 601

Prerequisite(s):

10940 (v.3) WASM Resource Sector Finance 601 or any previous version

Syllabus:

Time value of money and Discounted Cash Flow(DCF) methods - a review, Sensitivity and Risk Analysis, Monte Carlo simulations, optimum mine life risk and decision analysis decision trees. Options and Option Valuation - Stochastic Processes and the Black-Scholes analysis. Real Option Pricing in the Mineral and Energy Sectors - Valuing Operating Options.

Unit Outcomes:

On successful completion of this unit, students will have- Become familiar with recent developments in risk analysis and project evaluation, including the application of option valuation methodologies to project and investment opportunities decisions in the mineral and petroleum sector. Been in a position to communicate with specialists in these fields and to fully understand and therefore become capable of interpreting and explaining the results of sophisticated analyses and evaluations carried out by 'experts'. Been provided with an ideal 'springboard' to further pursue the subjects of risk analysis and of real option valuations as applied to the resources sector at greater professional depth.

Text and references listed above are for your information only and current as of September 30, 2003. Please check with the unit coordinator for up-to-date information.

Unit References:

Baker, M.P., Mayfield, E.S. and Parson, J.E. (1998), Alternative models of uncertain commodity prices for use with modern asset pricing methods. The Energy Journal V.19 (1) pp. 115-148. Bradley, P. (1998), On the use of MAP for comparing alternative royalty systems for petroleum development projects. The Energy Journal v. 19 (1) pp. 47-82. Claeya, J. and Walkup, G. (1999), Discovering real options in oilfields exploration and development. SPE Hydrocarbon Economics and Evaluation Symposium, Dallas, Society of Petroleum Engineers. Clemen, R. (1996), Making hard decisions: an introduction to decision analysis (second edition). New York, Duxbury Press. Faiz, S. (2001), Real option applications: from success in asset valuation to challenges for an enterprise approach. Dallas, Society of Petroleum Engineers. Torries, T.F. - 1998 - Evaluating Mineral Projects: Application and Misconceptions - Society for Mining Metallurgy and Exploration Inc. Copeland, T. E. & Keenan, P.T. (1998)How much is Flexibility worth? McKinney Quarterly 1992, N.Z. Jacoby, H. and Laughton, D. (1992), Project evaluation: a practical asset pricing method. The Energy Journal v.13, pp.19-47. Kirkwood, C.W. (2002), Decision tree primer. Temple, Arizona State University.

Unit Texts:

Benninga, S. (2000), Financial modelling (second edition). Cambridge, MIT Press. Mun, J. (2002), Real Options Analysis. New Jersey, John Wiley and Sons.

Unit Assessment Breakdown:

Class and individual assignments 40%. Final examination 60%. This is by grade/mark assessment.

Year	Location	Period	Internal	Area External	Central External
2004	Kalgoorlie Campus	Short Period 11	Y
2004	Kalgoorlie Campus	Summer Period	Y