Application of financial risk analysis for project evaluation at a large coal mine

Today risk analysis is largely employed in studying the uncertainty of financial decisions in new mining ventures. The methodology for examination and quantification of financial risks is investigated in this paper. A coal mining project is generally a long term process. Also, any increase in the project time, raises the probability of variation in effective financial parameters. Therefore, the forecasting and risk analysis for this kind of projects will be more important. For this reason, this work has been prepared for the purpose of presenting the methodology and uses of techniques applied in the evaluation of the long term projects to analyse and assess risk. The flexibility of spreadsheets and their statistical capabilities make them a common framework for simulation modelling. In this paper, the discussion is illustrated with an example of stochastic discounted cash flow for a real large coal mine. Then, Excel spreadsheet tools for the simulation, and also a powerful risk analysis software have been used. Finally, the paper examines output data from analysis of mentioned project.