Title: A novel risk-adjusted discount rate methodology for mine economic evaluation – a case study

Authors: Richard Gyebuni; Yao Yevenyo Ziggah; Daniel Mireku-Gyimah

Addresses: Department of Mining Engineering, Faculty of Mining and Minerals Technology, University of Mines and Technology, P.O. Box 237, Tarkwa, Western Region, Ghana ' Department of Geomatic Engineering, Faculty of Geosciences and Environmental Studies, University of Mines and Technology, P.O. Box 237, Tarkwa, Western Region, Ghana ' Department of Mining Engineering, Faculty of Mining and Minerals Technology, University of Mines and Technology, P.O. Box 237, Tarkwa, Western Region, Ghana

Abstract: Though several investment decision criteria are available for carrying out mine economic evaluations, the net present value (NPV) is most commonly used. However, one significant challenge of NPV criterion is the conventional assumption of the discount rate as input parameter. To obtain a more realistic discount rate, this study proposes that all significant risk factors peculiar to a particular mineral project must be investigated. To this end, ten risk factors of the Mpeasem Gold Project in Ghana were identified. The risk factors were quantified using a modified fuzzy analytical hierarchy process (FAHP) with extent analysis method. The result of the FAHP analysis gave a risk-adjusted discount rate of 11.93% as against the determined conventionally assumed discount rate of 15% based on prevailing fiscal conditions of Ghana. The obtained NPV for the FAHP gives more confidence to the investor in making the accept-reject decision.

Keywords: discount rate; fuzzy analytical hierarchy process; FAHP; net present value; NPV; cashflow analysis.

DOI: 10.1504/IJMME.2022.129522

International Journal of Mining and Mineral Engineering, 2022 Vol.13 No.2, pp.162 - 184

Received: 23 Feb 2022
Accepted: 20 Oct 2022
Published online: 13 Mar 2023 *

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