ECONOMIC FEASIBILITY ANALYSIS OF MINING BUSINESS
PLAN CV.
XYZ.
GOLOPONGKOR VILLAGE.
KOMODO DISTRICT,
WEST MANGGARAI REGENCY
Volume: 6 Number: 5 Page: 925 - 931 Article History:
Received: 2025-07-08 Revised: 2025-08-01 Accepted: 2025-09-15 Robertho KADJI Mining Engineering Study Program.
Nusa Cendana University.
Indonesia Corresponding author: Robertho Kadji E-mail: robertho_kadji@staf.
Abstract:
This research aims to evaluate the economic feasibility of the mining business plan proposed by CV.
XYZ is located in Golopongkor Village.
Komodo District.
West Manggarai Regency, with an operational production area of 4.
27 Ha.
The analysis was conducted using three main indicators, namely Net Present Value (NPV).
Internal Rate of Return (IRR), and Payback Period (PBP), to assess the profitability and feasibility of the investment.
The research results show that the positive NPV value of Rp1,130,299,085.
00 indicates that the project is capable of providing economic benefits that exceed the initial investment value.
The IRR value of 39% and the PBP of 0.
7 years reflect a relatively quick capital recovery These values indicate that the mining project is economically feasible and provides significant financial benefits.
The expected future cash flows exceed the initial investment, and the quick payback period reinforces the recommendation that this project is feasible.
With high profit potential and controlled financial risks, this project is deemed capable of contributing to business growth and the operational sustainability of the company.
Keywords: Net Present Value (NPV).
Internal Rate of Return (IRR).
Payback Period (PBP).
INTRODUCTION
The construction growth in the Manggarai Barat region and its vicinity has generated a need for building material resources, particularly natural sand and gravel .
, which are obtained through mining operations.
CV.
XYZ is an industrial company involved in the mining industry, specializing in the extraction of natural sand and gravel .
, situated in Golopongkor Village.
Komodo District.
West Manggarai Regency, including an operating production area of 4.
27 hectares.
An investment analysis is essential to evaluate the economic viability of mining business plans for the government in the context of feasibility assessments of mining enterprises.
The feasibility study document functions as a directive in oversight, particularly with the management of environmental The results of this feasibility study are advantageous for shareholders and creditors, including banks and non-bank financial organizations.
An economic feasibility study assesses the viability of a mining project by identifying the optimal means to deliver economic and social benefits, despite encountering intricate risks such as resource uncertainty, market conditions, and operational challenges (Mahapatro, 2015.
Mohnot et , 2.
Key financial indicators, including Net Present Value (NPV).
Internal Rate of Return (IRR), and Payback Period (PBP), are typically employed in the analysis, alongside methodologies such as Discounted Cash Flow (DCF) for cash flow estimation and project attractiveness evaluation across diverse scenarios (Noerman & Faturohman, 2024.
Utami et al.
, 2024.
Rocha et al.
, 2.
The feasibility study encompasses sensitivity and risk analysis to assess the effects of variable fluctuations, including commodity prices, capital expenditures, and operating expenses.
This methodology is progressively vital for informed decision-making and risk management (Utami et , 2024.
Rocha et al.
, 2021.
Cisternas et al.
, 2.
Recent advancements underscore the importance This open-access article is distributed under a Creative Commons Attribution (CC-BY-NC) 4.
0 license of incorporating risk management frameworks and scenario planning that address investment uncertainties in the mining sector, especially for projects involving deep mineral resources or novel technologies (Rodryguez et al.
, 2024.
Cisternas et al.
, 2.
This study was undertaken to assess the viability of the sand and gravel mining enterprise proposed by CV.
XYZ in Golopongkor Village.
Komodo District.
Manggarai Regency.
METHODS
This feasibility study necessitates research procedures to provide systematic and appropriate data collecting and processing.
This study employs a research method to evaluate economic feasibility based on three parameters, specifically:
Net Present Value (NPV).
It is a crucial financial indicator employed to evaluate the economic feasibility of mining projects by determining the present value of all future cash flows, encompassing both inflows and outflows, discounted over the investment's duration (Shou, 2022.
Drozdowski & DziekaEski, 2.
It offers a thorough assessment of value generation, clearly indicating the time value of money, which is essential for long-term mining operations typically marked by capital intensity and deferred revenue streams.
Net Present Value (NPV) is a technique employed to ascertain the net profit of CV.
XYZ will be obtained upon the conclusion of the mining era.
The equation utilized is derived from the works of Shou .
Shou .
, and DziekaEski & Drozdowski .
, which is as follows: NPV = (BCA - CCA) / .
A (BCC - c / .
)A (BCE - CCE / .
)A AA (Bt - Ct / .
- CCe.
Explanation:
NPV: Net Present Value .
n Indonesian rupia.
Bt: Annual revenue during period t Ct: Annual cash flow in period t CCe: The original investment amount in year 0 .
n rupia.
r: Interest rate or discount rate .
xpressed as a percentag.
t: Year of mining activity Assessment of economic feasibility utilizing the NPV approach to ascertain the potential profitability of the investment, predicated on the following criteria:
A A positive Net Present Value (NPV>.
indicates that the investment yields profit, rendering the rock mining strategy viable.
A When NPV=0, the investment yields no profit or loss.
If the NPV is negative (NPV<.
, the investor incurs losses, rendering the rock mining strategy The Internal Rate of Return (IRR).
It is the percentage rate of return on capital that the company is expected to get.
The IRR is calculated using the following equation, as referenced in (Mathews, 2023.
Lai, 2024.
Liu, 2.
: IRR = .
(NPV1 / (NPV1 - NPV.
2 - i.
Explanation:
IRR: Internal Rate of Return NPV1: Net Present Value Discount Rate NPV2: Net Present Value Discount Rate i2 i1: Initial experimental discount rate i2: Discount rate for the second trial This open-access article is distributed under a Creative Commons Attribution (CC-BY-NC) 4.
0 license A project is deemed acceptable if its Internal Rate of Return (IRR) exceeds the needed return .
r cost of capita.
conversely, if the IRR is inferior, the project is rejected (Mathews, 2023.
Lai, 2024.
Liu, 2.
The Internal Rate of Return (IRR) facilitates the comparison of various projects through percentage metrics.
nonetheless, it is most effective when utilized alongside Net Present Value (NPV) and additional methodologies for a more thorough evaluation, particularly when projects exhibit differing scales or cash flow patterns (Lai, 2024.
Liu, 2024.
Sheng, 2.
The Payback Period (PBP).
Is the duration required for a corporation to repay its capital investment? The equation utilized according to Yard .
Payback Period = n (.
/ .
) x 1 year a.
Clarification: The final year in which the cash flow was insufficient to offset the initial investment.
A a: Initial investment sum A b: Cumulative cash flow in year n A c: Cumulative cash flow in year n 1 The Payback Period (PBP) serves as a supplementary criterion that enhances primary investment assessment techniques like Net Present Value (NPV) and Internal Rate of Return (IRR), owing to its capacity to succinctly illustrate the duration needed to recoup the initial investment (Narayanan, 1.
Nonetheless.
PBP has constraints as it neglects the time value of money and fails to assess the project's overall profitability.
thus, it cannot supplant more thorough evaluation methods like NPV and IRR, but should rather serve as a supplementary tool to offer further insights into short-term capital return risks (Narayanan, 1.
RESULT AND DISCUSSION
The investment required for this sand and gravel mining activity is Rp135,000,000.
00, with the funding sourced from CV.
XYZ itself, detailed in the fixed capital.
Fixed capital.
The sand and gravel mining business includes the costs of exploration, road construction, and the preparation of environmental documents.
The amount of fixed capital investment for CV.
XYZ can be seen in Table 1.
Table 1.
Fixed Capital Description Exploration Exploration Implementation Cost
Road Construction Cost
Environmental Document Preparation Costs Total
Fixed Cost
Year of2
15,000,000,00
20,000,000,00
100,000,000,00
135,000,000,00
Working Capital.
CV.
XYZ calculates the estimated working capital expended each year.
These costs include employee salaries, administrative expenses, environmental management costs, reclamation costs.
Occupational Health and Safety costs, and community empowerment costs.
The details of the CV.
XYZ's working capital can be seen in Table 2.
Table 2.
Working Capital This open-access article is distributed under a Creative Commons Attribution (CC-BY-NC) 4.
0 license No Working Capital Employee Salary and Annual Benefits Administrative Fee per year Environmental Management Costs Reclamation Cost Occupational Safety and Health .
rocurement of PPE) Community Development Total Cost (R.
000,00 000,00 000,00 500,00 000,00 000,00 500,00 Production Costs.
Production costs are the expenses incurred by CV.
XYZ to produce sand and gravel.
These costs include fuel usage, with details available in Table 3.
Table 3.
Production Cost
Year 1
Year 2
Production Cost
Year 3
480,00
480,00
480,00
Description Fixed Cost
Fuel Cost
Year 4
Year 5
480,00
480,00
Sales Revenue.
The sales revenue of CV.
XYZ is obtained from the sale of mineral products with estimated sales revenue and costs as shown in Table 4.
Table 4.
Marketing Plan Uraian Year 1 Year 2 Sales Plan Year 3 Year 4 Year 5 Product Sand Gravel Selling price Sand Gravel Total Revenue (R.
Table 5.
Cash Flow CV.
XYZ
Years Investing Cost
Production Cost
Fixed Capital Tax
PNBP
Revenue Cash Flow
Year 0
Year 1
Marketing Plan
Year 2
Year 3
Year 4
Year 5
000,00
980,00
980,00
980,00
980,00
980,00
800,00
800,00
800,00
800,00
800,00
000,00
220,00
220,00
220,00
440,00
220,00
660,00
220,00
880,00
220,00
100,00
The results of the economic parameter calculations are as follows: Net Present Value (NPV), or the net cash flow that the company will obtain after the mining activities, can be calculated using This open-access article is distributed under a Creative Commons Attribution (CC-BY-NC) 4.
0 license Table 6.
Net Present Value (NPV) Current interest rate
Initial Investment Value Year 1
220,00
NPV
Year 2
220,00
085,00
4,50%
000,00
Net Cash Flow (R.
Year 3
220,00
Year 4
220,00
Year 5
220,00
Based on the NPV calculation results, an amount of Rp1,130,299,085.
00 was obtained.
Moreover, from the positive NPV value, this mining business activity is economically feasible.
Internal Rate of Return (IRR).
What is the rate of return on investment that will be obtained by CV? XYZ is using equation 2.
Table 7.
Internal Rate of Return (IRR) Current interest rate
Initial Investment Value Year 1
391,278,220,00
IRR
Year 2
526,278,220,00
4,50%
1,000,000,000,00
Net Cash Flow (R.
Year 3
526,278,220,00
Year 4
526,278,220,00
Year 5
526,278,220,00
Based on the IRR calculation, a value of 39% was obtained.
This IRR value is greater than the interest rate, thus concluding that CV.
XYZ's mining plan is economical and profitable, making it Payback Period (PBP).
Can be calculated using equation 3, and the results are as follows.
Table 8.
Payback Period (PBP) Current interest rate
Initial Investment Value Year 1
220,00
NPV
PBP
Year 2
220,00
085,00
4,50%
000,00
Net Cash Flow (R.
Year 3
220,00
Year 4
220,00
Year 5
220,00
Based on calculations using the Payback Period method, a result of 0.
7 years was obtained, which is the time required to recover the initial investment from the cash flow generated by mining and processing activities.
CONCLUSION
Based on the results of the economic feasibility analysis conducted, a Net Present Value (NPV) of Rp 1,130,299,085.
00 was obtained with a positive value, indicating that the mining project proposed by CV.
XYZ has significant financial profit potential.
This positive NPV value indicates that the expected future cash flows from the project exceed the initial investment costs, making the project feasible to implement.
Based on the IRR value obtained at 39% it indicates a competitive and profitable return on investment for the company.
The Payback Period calculation yielded a result of 7 years, indicating a return on investment in the ninth month of mining operations, thus providing positive cash flow in the first year and generating profits throughout the 5-year duration of the This open-access article is distributed under a Creative Commons Attribution (CC-BY-NC) 4.
0 license Mining Business License.
The positive NPV calculation, competitive IRR value, and efficient PBP with a duration of less than the total operational time consistently demonstrate that the CV.
The XYZ sand mining project is economically and financially feasible to implement.
This sand and gravel mining project not only promises optimal profits but also supports rational and sustainable investment decisions.
REFERENCES