Real options in metal mining project valuation: Review of literature

This paper presents a literature review of the academic literature that covers real option analysis in the context of metal mining investments. Real options are of growing importance in metal mining, because of increased uncertainty of markets and complexity of new projects. The central promise of real option valuation methods applied to project analysis is to both hedge and enhance expected economic returns. The reviewed literature is sorted on the basis of the valuation approach used and by the type of real options studied. The distinction between real options “on projects” and “in projects” is made and discussed.