Real Option Analysis for Deep-sea Mineral Resources Development in Japanese Waters

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  • Kohama Makoto
    Graduate School of Creative Science and Engineering, Waseda University
  • Adachi Tsuyoshi
    International Center for Research and Education on Mineral and Energy Resources, Akita
  • Tokoro Chiharu
    Faculty of Science and Engineering, Waseda University

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  • 日本近海における海底熱水鉱床開発のリアルオプション分析
  • ニホン キンカイ ニ オケル カイテイ ネッスイ コウショウ カイハツ ノ リアルオプション ブンセキ

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Abstract

Deep-sea minerals extraction has been attracted as domestic resources of Japan from the viewpoint of resources security. This study investigates feasibility evaluation with uncertainties for deep-sea mineral resources development project using real option analysis. Resources development has a lot of unique uncertainties. We propose multi-investments (compound option) model considering volatility of metal prices and ore deposit scale. Results from this model imply high option value at a case study of Sunrise ore deposit in Japanese EEZ, and show marginal investment prices and marginal cost to abandon the project by comparative statics. Furthermore, considering historical trend of metal prices, different types of stochastic process i.e. mean reverting process and geometric brownian motion are compared.

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