Understanding resource investment

[Truncated abstract] The unprecedented resources boom of the first decade of the 21st century has had a dramatic impact on the Australian economy. The surge in commodity prices stimulated much investment in resource projects, which, at the peak, accounted for almost one-half of all private investment in Australia. This thesis analyses the value of this investment from a capital-market perspective. I estimate the impact on the wealth of shareholders in resource companies of three key aspects in getting resource projects underway:
• Government approvals. The development of a resource project heavily relies on approvals from government. Initially, a resource company has to obtain an exploration license from government to prospect the targeted area. Then, after intensive rounds of feasibility studies, if the results reveal economic value, the company would probably conduct an environmental impact survey, apply for environmental approvals and prepare the development approval applications. All this would have to occur before construction of the project can commence. I use an event study approach to investigate the impact of government approvals on shareholder wealth. The results suggest that, on average, the granting of approvals substantially increases shareholders wealth, as well as enhancing liquidity of stock in the companies.