When Are Real Options Exercised? An Empirical Study of Mine Closings

In this article, we study a well-known real option: the opening and closing of mines. Using a new database that tracks the annual opening and closing decisions of 285 developed North American gold mines in the period 1988–1997, we find that the real options model is a useful descriptor of mines’ opening and shutting decisions. In addition, we find that the decision whether to shut a mine is related to firm-specific managerial factors not normally considered within a strict real options model.