SIMON YULIYANTO
041214353036
Dosen Pembimbing
Dr.Andry Irwanto,MBA.,Ak.,CMA.CA

ABSTRACT

Uncertainty in coal prices commodity are external factors that difficult to
predict because it is beyond the ability of management control. Over the last
decade the coal price on the world market performed very volatile and tends to
weaken. Factors that lead to the weakening of global coal prices are the declining
demand due to the economic slowdown in China, other Asian countries and
Europe, while the increase in coal exports volume from South Africa, Colombia,
and Indonesia itself causes oversupply in the world market. On the other hand,
literature study stated that the high volatility of coal prices significantly influence
the revenue of coal mining company.
One of the emerging technique that arguably the best at valuating natural
resources is a Real Options Analysis or Real Options Valuation. Real Options
Analysis is a concept derived from financial options. The advantages of this
method compared to conventional method is the Real Options Analysis can
accommodate uncertainty and management decisions flexibility into the valuation
calculations.
This study specifically assess on the valuation of PT. X, one of the private
coal mining companies operating in Indonesia, using Real Options Analysis
methods, Binomial Tree solutions. The results showed the valuation of mining PT.
X with the Discounted Cash Flow method amounted to $ 27.31 Million, while the
valuation of Real Options Analysis with Options to Expand yielded $ 36.52
Million, and Options to Abandon $ 27.77 Million. It is found that Real Options
approach presented a feasible and mathematically viable alternative to traditional
NPV methodology. Furthermore, Real Options Analysis yielded results that were
in the vincinity of more than 30% greater than the traditional NPV values. This
was found to be in line with the literature.
Keywords: Real Options Analysis, Binomial Tree, Valuation, Indonesian
Thermal Coal Mining.