Evaluation of Sangan iron ore mines project under price and operating cost uncertainty, using the option of mineral stockpiling

The valuation of a mining project is always under uncertainty due to the very complex nature of the deposit. Therefore, in order to evaluate the project more accurately, sources of uncertainty should always be identified and analyzed to increase the net present value. One of the most important sources of uncertainty in a mining project is the price and operating costs that have a significant impact on the net present value during the implementation of that project. According to many researches related to the evaluation of mining projects under conditions of uncertainty, they showed that the use of the real options approach had a significant impact on increasing the net present value of mining projects. In this paper, using the real option approach, according to the case study that was carried out in the Sangan iron ore mine project, an option under the title of low-grade iron ore stockpile (grade less than 35%) and iron ore stockpile with oxide percentage less than FEO<10% defined. The purpose of defining this option is to check the right time to sell low-grade iron ore and iron ore with low oxide percentage, which as a result, according to the technique of real options, can lead to the profitability of the project and increase the net present value.