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Decreasing minerals׳ revenue risk by diversification of mineral production in mineral rich countries

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  • Adibi, Nabiollah
  • Ataee-pour, Majid

Abstract

There are numerous countries that have a variety of mineral products and commodities which are the source of government revenue and foreign exchange. Mineral revenues are essential for the development of mineral rich countries. Generally, the minerals market has many risks; therefore the revenue gained from minerals is accompanied with a level of risk. In order to plan for mineral revenue by governments, the risk of mineral revenue should be decreased. In this paper, minerals are considered as risky assets to apply the Modern Portfolio Theory (MPT). This method is able to decrease the risk of minerals׳ revenue by optimum diversification. As a case study, mineral production of Iran׳s mining sector is studied. The non-linear model is solved by quadratic programming. To achieve the country׳s expected revenue the model determines the type and quantity of minerals to be produced. The findings show that the MPT model has an adequate potential to reduce the risk of the government׳s mineral revenue compared with the current situation.

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  • Adibi, Nabiollah & Ataee-pour, Majid, 2015. "Decreasing minerals׳ revenue risk by diversification of mineral production in mineral rich countries," Resources Policy, Elsevier, vol. 45(C), pages 121-129.
    • Handle: RePEc:eee:jrpoli:v:45:y:2015:i:c:p:121-129
    DOI: 10.1016/j.resourpol.2015.04.006
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