1. You are examining the financial viability of investing in some abandoned copper mines in Chile which still have significant copper deposits. A geologist survey suggests that there might still be 10 million pounds of copper in the mines and the cost of opening up the mines will be $2 million. The Chilean government is willing to grant a 25year lease on the mine. At the current copper price the present value of the net cash flows from this mine is $1.8m.However the annualized standard deviation in copper prices is 25% and the risk free rate is 7%. Estimate the value of right to the mine based on an option-pricing model.
You are examining the financial viability of investing in some abandoned copper mines
by | Sep 6, 2025 | Statistics
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