Finding the Right Time to Mine: A Real Options Analysis of Landfill Mining Projects
The raw material extraction has increased rapidly since the last century. At the same time, each year billion tonnes of waste containing useful materials (e.g., glass, plastics, and metals) are disposed of in uncontrolled and controlled landfills. One option to tackle this problem is to follow the landfill mining (LFM) approach, which could be the chance not only to transform landfills into the new “mines,” but also to enhance the image of mining sector in the society. Provided, however, that the economic factors associated with LFM are numerous and complex, this paper aims at estimating the economic feasibility of LFM projects by means of a modern management approach, namely the Real Option Valuation (ROV). For the purpose of the analysis, a hypothetical “typical” landfill site is examined and different alternatives are formed. The proposed project is examined via conventional DCF and ROV, taking into account multiple sources of uncertainties. The results indicate that the DCF approach results may be questionable. On the other hand, ROV analysis reveals through the passage of time events and appropriate actions to be taken and assists in identifying and capturing a higher economic value for the investment.
KeywordsLandfill mining Material recovery Real option valuation
This work was supported by the LIFE + financial instrument of the European Community in the context of LIFE RECLAIM “Landfill mining pilot application for recovery of invaluable metals, materials, land and energy” (www.reclaim.gr), Grant: LIFE12 ENV/GR/000427. The coordinating beneficiary is ENVECO S.A., and the associated beneficiaries are the Municipality of Polygyros, School of Mining & Metal Engineering NTUA, and HELECTOR S.Α.
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