Application of real compound option for pricing mineral right

Mineral right can be seen as a compound option divided by years. In order to calculate the value of right,build an pricing model based on compound option under the conditions of constant volatility and price followed geometric Brownian motion. Combined with an example of a copper mine mining, analyze the price between the discount cash flow method and the method of compound option. It turns out that the price is higher in the compound option pricing method than in DCF, which means that price premium exists negative phenomenon in the market.This conclusion provides decision-making basis for mining investment of mineral enterprises