Bidding for the Antamina Mine: Valuation and Incentives in a Real Options Context by A. Moel and P. Tufano

Paper of the Week 14

“The Government of Romania just failed in auctioning Cuprumin, a transaction involving copper mining rights. There were several mistakes made in structuring the transaction from disregarding the value of Knowing Your Customer to broad lack of knowledge with respect to real option theory and simple game theory.

The Paper of the Week 14, Bidding for the Antamina Mine: Valuation and Incentives in a Real Options Context by A. Moel and P. Tufano discusses the bidding for a copper mine that was offered for sale by the Peruvian government as part of the country’s privatization program. This same case represents the base for the Harvard Business School teaching case, “Bidding for Antamina” and the associated classroom note, “Copper and Zinc Markets 1996”. It is worth reading as an introductory short paper touching on aspects of negotiation theory, real option analysis and game theory.” Lucian Isar

More about real options analysis can be found in Investment under Uncertainty by A.K. Dixit and R.S. Pindyck and about game theory here and here.

Image from mining-technology.com

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