Date of Graduation

1993

Document Type

Dissertation/Thesis

Abstract

As the longwall mining method enjoys increasing success in a wide variety of coal seams around the world, new operators acquire their first longwall faces at an increasing rate. The large economic investment associated with this acquisition decision, approaching {dollar}16,000,000 USD in some cases, is cause for hesitation to many corporations' officers. This reluctance is based on not only the magnitude of the investment, but the lack of information about the possible and likely project outcome. The poor assessment of project risk which results from uncertainty in various project parameters is a severe impediment to rational decision making. To address this problem, a stochastic algorithm was created to evaluate the effect of uncertainty in project `input' parameters on the statistical project outcome. The variability of project cash flows defines the risk associated with the project. It also allows evaluation of the expected value of the outcome. This information, when expressed in the financial valuation terms of project Net Present Value (NPV), provides decision makers with adequate information to compare multiple project alternatives as well as assess the viability of any single alternative exactly. Application of the technique to three case-studies yielded several notable conclusions. First and foremost, it is evident that traditional deterministic project valuation techniques may overvalue projects by more than 60%. Further, it was shown that the outcome distributions are asymmetric with a negative-skew. Non-linear impacts were associated with approximately 50 percent of the identified project parameters, accounting for the previously noted negative-skew in the NPV outcome distributions for longwall coal mining projects. Conclusions are also made about risk management for longwall mining projects.

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