The Financial Impact of Schedule Delays on The Kucing Liar (KL) Project at PT Freeport Indonesia: A Scenario-Based Discounted Cash Flow Analysis
DOI:
https://doi.org/10.46799/adv.v4i10.724Keywords:
Discounted Cash Flow, Schedule Delay, Scenario Analysis, Sensitivity Analysis, Real Terms, Block Cave MiningAbstract
PT Freeport Indonesia (PTFI) is transitioning from the depleted Grasberg open-pit mine to underground block-caving operations, with Kucing Liar (KL) representing its largest underground mining project. Production is scheduled to commence on July 1, 2029, while the current mining license expires in 2041. Given this fixed expiration date, schedule delays could defer revenue generation and reduce project value, highlighting the need for a quantitative assessment of delay-related financial losses and schedule-protection investments. This study developed a deterministic discounted cash flow (DCF) model using the 3Q26R2 mine plan, the 2023 feasibility study, and company cost data covering 2021–2041, expressed in constant 2026 U.S. dollars. The analysis incorporated three scheduling scenarios, six cost-escalation variants, and sensitivity assessments. The base-case net present value (NPV) was $9,408 million at a 10% real discount rate, with a projected payback period ending in 2032. A six-month delay reduced NPV by $665 million, while a 12-month delay combined with a 10% cost escalation resulted in a $1,569 million reduction (16.7%). The estimated financial impact averaged $111 million per month of delay, increasing to $138 million when capital expenditures could not be rescheduled. Approximately two-thirds of the NPV reduction resulted from deferred cash flows, while the remaining loss was attributable to production extending beyond the 2041 license expiration. Across cost-escalation scenarios, the financial impact ranged from $110 million to $119 million per month, with schedule performance demonstrating approximately three times greater influence on project value than development capital expenditures. The findings established an economic basis for schedule-protection investments, including buffer ore stockpiles, milestone-based contractor incentives, and conditional contingency reserves, with benefit-cost ratios ranging from 1.9 to 4.9. A five-year mining license extension was estimated to generate an additional $1,981 million in project value. Furthermore, monthly monitoring of development tonnage could identify potential schedule deviations as early as April 2027, rather than 2031, enabling earlier corrective interventions.
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