The application of coal mining project decision-making based on abandon option

The coal industry is in the important position of national economy in China. For the investment projects, its mining exploration has the characteristics of longer cycle, larger investment scale and higher risk etc. Especially in the later stage of coal mining project, due to increased difficulties of coal mining and reduced coal resources, coal mining with the economic benefit is falling rapidly. However, the traditional evaluation method of coal mining project investment isn´t considered the selective which happens at the later process, causing the traditional evaluation method to underestimate the value of the project. This article analyzed the shortcomings of the traditional evaluation method, combined with the characteristics of the later stage of coal mining project, and then established the model of abandon option. This can provide coal enterprise a new method to making scientific investment decision.