Year: 2026 | Month: June | Volume: 13 | Issue: 6 | Pages: 507-523
DOI: https://doi.org/10.52403/ijrr.20260649
A Feasibility Study Analysis of Low-Rank Coal Mine in North Musi Rawas Regency, South Sumatera, Indonesia A Free Cash Flow to Firm (FCFF) and Discounted Cash Flow (DCF) Approach
Muhammad Fachry Anindyo1, Yuhana Astuti2, Fajra Octrina3
1,2,3Master of Management Distance Learning Program, Faculty of Economics and Business, Telkom University, Bandung, Indonesia. .
Corresponding Author: Yuhana Astuti
ABSTRACT
The coal mining industry in Indonesia faces severe global price volatility challenges that significantly impact the economic viability of low-calorific coal resources. This study aims to analyze the financial feasibility of a low-rank coal mining project at the IUP OP PT GPU concession in North Musi Rawas, South Sumatra, utilizing the Discounted Cash Flow (DCF) methodology. The research employs a quantitative descriptive method, integrating technical parameters from PT GPU with financial data from PT Daaz Bara Lestari Tbk as the Joint Operation partner. The discount rate is established at a Weighted Average Cost of Capital (WACC) of 16.16%, derived via the extended Capital Asset Pricing Model (CAPM) approach. Free Cash Flow to the Firm (FCFF) projections are modeled over a 10-year life of mine based on a peak production capacity of 660,000 MT.
The results indicate that the project is highly feasible, delivering an excellent rate of capital return. The investment performance proves remarkably robust, as evidenced by a significantly positive Net Present Value (NPV) of USD 5.81 million (IDR 97.83 billion), an exceptionally high Internal Rate of Return (IRR) reaching 88.00%, an ultra-swift Discounted Payback Period (DPP) of 1.07 years, and a Discounted Profitability Index (DPI) of 5.27. In contrast to conventional modeling, the annualized FCFF streams are projected to maintain a consistent surplus in the green regime until the end of the mine life without leaving any deficits. Sensitivity analysis confirms that the coal selling price is the most critical external variable; however, the project possesses an exceptionally thick margin cushion, ensuring that even a severe -5% price contraction will not trigger serious financial risks and safely preserves a positive NPV. In conclusion, the project demonstrates high fundamental resilience against market risks, and the implementation of operational strategies such as production acceleration and stripping ratio tailoring is highly recommended to maximize and secure corporate investment profitability.
Keywords: sensitivity analysis, low-calorific coal, Discounted Cash Flow, Internal Rate of Return, Net Present Value, feasibility study. .
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