Auction strategy helps resource firm find best method to exploit holdings

The Problem

A resource company needed to find the best way to exploit holdings in a remote region where development was financially risky and environmentally sensitive.

The Process

Senior management used the Open Options Process to model the client's possible actions and their preferences as well as those of other resource firms, government regulators, environmental groups and residents of the region.

The Solution

The proposed strategy centered on creating an auction environment for divesting the holdings most profitably to another firm who would actually take the risks of development. One surprising observation was the relative insignificance of legal action available to environmentalists, residents and government agencies. Although of potentially high visibility, the potential legal costs were simply part of the environment in which development would take place.