Research Outputs (Mining Engineering)
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Item A survey of applications of multicriteria decision analysis methods in mine planning and related case studies.(The Southern African Institute of Mining and Metallurgy., 2016-11) Mahase, M.J.; Musingwini, C.; Nhleko, A.S.In an environment like the mining industry, which is characterized by different stakeholders with multiple objectives, multi-criteria decision analysis (MCDA) is a useful approach for optimal decision-making. The application of MCDA techniques in the mining industry has predominantly been in mine planning and related problems, although no comprehensive survey has previously been undertaken to establish the application trends. A survey of the use of MCDA techniques was therefore conducted using case studies from the literature. It was noted that often two or more methods are applied to the same problem in order to increase confidence in the solution derived. As the number of criteria and alternatives increases, some methods become inefficient. A combination of the analytic hierarchy process (AHP) method with other MCDA techniques was the most frequently used approach, indicating the efficiency of the AHP method, especially when evaluating problems with more criteria and fewer alternatives. A combination of fuzzy theory with AHP or other methods incorporates uncertainty. The findings from the survey will benefit users applying MCDA techniques to solve mine planning and related problems.Item Estimating cost of equity in project discount rates: comparison of the Capital Asset Pricing Model and Gordon's Wealth Growth Model.(The Southern African Institute of Mining and Metallurgy., 2016-03) Nhleko, A.S.; Musingwini, C.Since the Global Financial Crisis (GFC) in mid-2008, capital has been more difficult to access. Mining projects must contend with projects from other industries for scarce capital. A decision to invest available capital in mineral projects requires that valuation be conducted to assess the expected return on the projects. The discounted cash flow (DCF) analysis is generally applied for the valuation of mining projects, whereby future cash flows are discounted to present value using an appropriate discount rate. The discount rate significantly affects the outcome of a valuation. Economic and finance theory provides tools to calculate discount rates. The discount rate must account for factors such as the risk and stage of development of the mineral project; hence the appropriate discount rate to utilize in a project is often a subject of debate. The discount rate is the weighted sum of the cost of debt and equity. There are several methods for determining the cost of equity. This study considers the commonly applied Capital Asset Pricing Model (CAPM) and Gordon's Wealth Growth Model because of their simplicity and availability of parameters required to estimate the cost of equity. This study explores how differences in the cost of equity obtained by these two methods can be explained for a mining environment. Data for empirical analysis were collected from the I-Net Bridge, McGregor BFA, and Bloomberg databases. It was found that Gordon's Wealth Growth Model provides better estimates of the cost of equity compared to the CAPM under depressed market conditions. Therefore, this research recommends that Gordon's Wealth Growth Model be used to estimate the discount rates for mining projects during periods of depressed market conditions.