  We introduce a new approach to incorporate uncertainty into the decision to
invest in a commodity reserve. The investment is an irreversible one-off
capital expenditure, after which the investor receives a stream of cashflow
from extracting the commodity and selling it on the spot market. The investor
is exposed to price uncertainty and uncertainty in the amount of available
resources in the reserves (i.e. technical uncertainty). She does, however,
learn about the reserve levels through time, which is a key determinant in the
decision to invest. To model the reserve level uncertainty and how she learns
about the estimates of the commodity in the reserve, we adopt a continuous-time
Markov chain model to value the option to invest in the reserve and investigate
the value that learning has prior to investment.
