Application of Financial Risk Analysis f

Today risk analysis is largely employed in studying the uncertainty of financial decisions in new mining ventures. The objective of this paper is to investigate the methodology for examination and quantification of financial risks relevant to a coal mining project, which is generally a long-term process. Given that any increase in project time raises the probability of variation in effective financial parameters, forecasting and risk analysis for these projects are critical. The methodology presented includes techniques applied in evaluating long-term projects to analyze and assess risk. Utilizing the flexibility of spreadsheets and their statistical capabilities, a common framework for simulation modeling is established. The discussion is illustrated through an example of stochastic discounted cash flow for a real large coal mine. Additionally, Excel spreadsheet tools and powerful risk analysis software are applied in the examination. The analysis reveals that the project carries a low risk while considering interest rate and price as probabilistic parameters. Sensitivity analysis indicates that the most significant input parameter affecting net present value (NPV) is the interest rate, highlighting the need for managers to focus on this variable during the project period.