...Harvard Business School 9-293-128 Rev. October 6, 1995 American Barrick Resources Corporation: Managing Gold Price Risk During 1992 the financial team of Toronto-based American Barrick Resources Corporation, one of the world’s fastest growing and most financially successful gold-mining concerns, met regularly to review strategic and tactical issues related to managing the firm’s exposure to gold price risk. Many major gold mines prided themselves on hedging none of the price risk of their output. If unhedged, a gold mine’s sole output, and hence its profits, cash flows, and stock price, were tied to gyrations in the price of gold. However, American Barrick had in place a gold-hedging program that was an integral and much publicized part of the firm’s corporate strategy. In an environment of falling gold prices, the firm’s hedge position had allowed it to profit handsomely and to sell its commodity output at prices well above market rates. For example, in 1992, American Barrick produced and sold over 1,280,000 ounces of gold at an average price of $422 per ounce, while the market price was about $345 per ounce.1 American Barrick’s gold-hedging program, and indeed all the corporate finance and treasury functions of the $4 billion market capitalization enterprise, were managed by a trio of relatively young but experienced financial executives: Gregory Wilkins (executive vice president and chief financial officer), Robert Wickham (vice president, finance), and Randall Oliphant...
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...Introduction Managing the risk of changing prices of gold is central to the business strategy of American Barrick Resources Corp., one of North America's largest and most successful gold-mining firms. The case contrasts this firm's hedging policies with those of its rivals that do not hedge and details the wide range of hedging products (gold loans, forwards, options, and spot deferred contracts) used to manage price risk. In 1992 the management of American Barrick is pleasantly surprised by unexpected new gold finds, but this new production places demands on the firm's hedging program and tests the firm's commitment to hedging when prices of gold and of many hedging vehicles are unattractive. The gold mining industry has been heavily impacted by the fluctuating gold prices and continuously rising operating costs. Hedging gold prices has become important to ensure financial stability in a sector where mines are unprofitable due to high volatility. Through this case we question the value created by hedging and analyse various instruments to decide upon the best available instrument to Barrick. In this document we explore: 1. Popular theories of hedging and focus on hedging in the gold industry. 2. Analyse features and risk of the gold hedging program at Barrick. 3. Analyse characteristics of Barrick’s gold hedging program. In this document we conclude that value of hedging gold prices creates value for shareholders especially when other firms remain exposed. ...
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...Course: Business Communication Course number: 04-71-100-02 Assignment: Case Analysis of Barrick Gold Professor: Joanne Ramsay Name: Xueying Huang Student number: 104102020 Date submitted: Oct.1, 2013 Case Analysis of Barrick Gold In this essay, I will discuss the main communication problem Barrick faced and its causes and symptoms. I will also analyze the key stakeholder groups and the issues they are concerned. Finally, I will discuss how Barrick use the communication model to communicate efficiently to each stakeholder group. The main communication problem Barrick faced is lack of communication skills, loss of trust and emotional interference of stakeholders. In the case of sexual assaults, Barrick responded by conducting investigations and making its findings known. It sounded irresponsible and indifferent. The communication problem prevented the mining project from continuing because of too much opposition. As a result, the company would lose a lot of profits. The cause of the communication problem is that stakeholders didn’t have enough information from Barrick. In fact, Barrick had developed corporate social responsibility practices to eliminate the damage to the environment. It also invested on the local education and could provide many jobs to the local people. However, the stakeholder groups didn’t realize these facts clearly. As a result, they couldn’t make objective judgments. The symptom of this problem is too much opposition toward to the Pascua-Lama...
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...the Barrick mining company case, one may notice there are many problems confronting the firm ranging from property vandals, trespass, sexual assaults, and deaths to fraudulence conducted by Tanzanian police. Many may argue that as long as the region is plagued by unemployment and poverty, violent conflicts will continue to intensify. This, however, does not hold true because the area is poor to begin with. In fact, since Barrick’s arrival, the community has gained accessed to electricity, roads, employments, hospitals… etc. (Regent, p.1) Looking at a bigger picture, it all comes down to one core problem that the villagers do not feel Barrick has done enough to the community comparing to the profit it has gained. In other words, the residents feel they are being ripped off because they benefit little to nothing from these mining activities. Even worse, the villagers living around the mine suffer the pollution and the climate of fear of violence that the company has created. In addition, Barrick’s failure to honour its promises of demarcating an area for small scale miners and setting aside money equivalent to one percent of the company’s income fuels the intension. Therefore, violence will continue as long as villages’ dissatisfactions remain unsolved. There are two possible options Barrick can attempt to solve this conflict. The first option is Barrick should honour its promises mentioned above. A war cannot be won by force and it has been proven by history. What Barrick has...
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...Introduction The following essay focuses on the mining conglomerate Barrick Gold Corporation. Barrick owns gold and copper mines across Australia, Africa, and the Americas and these geographical locations provide the focus of the essay’s Macroenviromental analysis. The gold is sold to various gold bullion dealers at market prices whereas copper is sold to copper product manufacturers and copper traders in Europe, North America, South America and Asia (BarrickResponsibilty, 2013). Barrick’s Macroenviroment According to Kotler et al. (2011) a company and all of the other actors operate in a larger macroenviroment of forces that shape opportunities and pose threats to a company such as Barrick. Jobber and Ellis-Chadwick (2013) further imply that it is these actors and forces that affect the mining company’s capability to operate effectively in providing products and services to its customers. Its external environment is characterized by elements that do not have an immediate impact on its performance albeit their impact being felt over the long term. There are those that can influence the company marketing activities without management being able to control them hence the need to continuously monitor them or risk going out of business (Wilson, 2006). The framework that best discusses these elements is the PESTLE Analysis as it provides the strategic planning and environmental analysis that can be useful for Barrick to improve performance and ensure its long term existence as a going...
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...management team never think of doing justice and arrange to get better returns to each shareholder. As it is known that, shareholders approve the compensation of senior management, many in difficult times, there are proposal put off by the management for higher compensation which normally not accepted the shareholders. So they do not approve it. Even though there are difficulties in approving the compensation, the management tries kind of taking revenge and sending and ensures that, the company is stepping to a merger or acquisitions or spinoffs or share price goes down drastically by reducing the market value. It is observed in case of a company namely Barrick Gold Corporation, in Canada mentioning that rejection of $47 Million compensation by the shareholders, brought down the share price of the company to a price which the lowest in the last twenty years. In this case, the denial of approval was majorly done by the institutional shareholders. As a consequence of this, the company had very difficult time in terms of...
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...Introduction Gold is a very valuable metal that has many uses around the world from being the foundation of the world’s economy to jewellery, electronics such as mobile phones, calculators, computers and televisions as well as dentistry and other medical techniques (The Many Uses of Gold 2005-2013). Gold has been used in the economy for over 6000 years (Neale. T 2005). The early transactions were done using pieces of gold. Then there was the ‘gold standard’, where a country maintained a stockpile of gold to back every dollar in circulation. This meant any person could present paper currency to the government and demand in exchange an equal values of gold, this is no longer used in any nation due to its cumbersome. Now gold is used as a financial backing for currency (The Many Uses of Gold 2005-2013). Copper is essential in everyday life. It is used universally in the home for water pipes, locks, electrical wiring and electronics. Copper has excellent thermal and electrical conductive properties, as well as being strong and ductile it is hygienic, has a resistance to corrosion and is extremely easy to alloy (Copper – a vital element 2013). It is due to these properties that copper is such a popular metal that is widely used in the infrastructure, electrical, mechanical and construction sectors of society. Gold and copper are both extracted from the earth’s core through mining techniques. Papua New Guinea (PNG) is ranked as the 11th gold producer in the world (Gold Mining...
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...name, hedge-fund experience and a personal network that reads like a Who’s Who of the commodities world. Source: Finsbury Ltd. via Bloomberg A member of the Rothschild lineage that helped bankroll Britain’s war against Napoleonic France, he’s leading a $3 billion takeover that will create the biggest exporter of coal to China. Advertisement Rothschild is leveraging his name, more than a decade of hedge-fund experience and a network that reads like a Who’s Who of commodities. He’s friends with Ivan Glasenberg, head of the biggest commodity trader Glencore International AG; advises Russian aluminum billionaire Oleg Deripaska; and is on the board of Peter Munk’s Barrick Gold Corp., the largest gold miner. “There’s no global coal company today,” Rothschild, 39, says in an interview. “There’s not a Barrick Gold in coal....
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...justified given Bre-X’s small size (it had a net loss of $Cdn. 366,677 in 1995 compared to a net income of $Cdn. 218 million from Barrick Gold Corp., a potential government-corporate partner) and limited connections within the country (established only in 1993 by exploring in the East Kalimantan rainforest). Another critical challenge faced by Bre-X was the public outcry over a foreign firm taking advantage of Indonesia’s wealth of natural resources. This mineral exploitation resulted in cries for public action to seize the land and deny Bre-X any compensation. Prominent public figures Dr. Amin Rais and Mr. Hartojo Wignjowinoto were most vocal in these demands. This is a classic example of the risk an unprepared company takes on when operating in a country that is transitioning both politically and economically. Over the first half of 1996, analysts predicted increasing success at Busang and as a result, Bre-X’s stock value rose. Indonesia, however, is a mixed economy where the government uses public action to manipulate and influence the private sector with ease. Bre-X’s failure to collaborate with an influential local company from the beginning of its venture led it to the current crisis. The company’s developmental and operational stagnation resulted in increased pressure from the world’s largest mining firms, Barrick...
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...water operations in the U.S. and Brazil. Nestle will not allow a union and shuts down every effort for workers to have a collective bargaining arrangement. They do not practice fair trade and take every advantage they can to exploit workers. Nestle defends these unethical practices with denial and deception to convince people they aren’t a bad corporation. Barrick Gold Corporation is also an example of an extremely unethical company. They are a Toronto based corporation that has allegedly had a part in burning down 130 homes in Papua New Guinea. They have been accused of manipulating Titles in Chile and Australia and leaving toxic levels of arsenic near Tanzania. They are associated with the 60% shrink of glaciers near the Argentina and Chile boarder. They have polluted water resources around the world and take advantage of third world countries and their resources. These companies are able to exploit the resources of third world countries and the people in them because of the demand for these products in the U.S. Consumers cannot directly see what goes into the products they buy from companies like Barrick and Nestle. They are not aware of what takes place or simply turn a blind eye for cheap gold and baby formula. The only reason these companies are able to operate in the manner they do is because the U.S. economy is knowingly or unknowingly supporting their practices. Patagonia on the other hand, is an example of a clothing company that...
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...Ethics and Social Responsibility Robert Blad MGT/498 May 8th, 2014 Instructor Dial Ethics and Social Responsibility There are vast amounts of companies that have been accused of doing something that is deemed unethical or not follow a certain social responsibility. However, as people can we really expect a fortune 500 company to maintain itself with so many rules, regulations, and changing variables? The answer is yes; if they are willing to follow a strict strategic management scope that allows them to stand their ground and build a foundation that others are able to honor at the same time. Throughout, we will talk about ethics and social responsibility and how it ties to strategic management. The Strategic Plan A strategic plan is the formulation, plan, and implementation of something that is a foundation for most companies. Having a plan is ideal but being strategic in understanding what is available to you as a company and having that pin pointed acceptance of knowing which way your company is heading and how you are able to achieve these results. Ethics are the foundation of many things are tied together through what a company should be doing to ensure they have public trust, responsibility for their actions, along with being readily available to answer any and all questions that arise. Considering that it seems difficult for many companies to maintain an ethical way of doing things because of the large demand for certain products is the balance for most...
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...With these developments, it is obvious that conflicts between parties of different nationalities occur and liability to tax on income of foreigners especially among those engaging in trading venture. Whilst the laws affecting domicile and residence may be sufficiently settled, it is paramount for courts to pursue a detailed analysis to ascertain specific preliminary issues so as to avoid controversial rulings. Courts often handle numerous financial cases that involve what can be best described as foreign or international elements. In such cases, court must decide whether it has the jurisdiction under the Family Law Act 1975 to make a decision on such cases. In the event that it is determined that the court is invested with the jurisdiction to determine the case, the court has to consider whether there is a system of law in foreign country that also has the jurisdiction to handle the case. As it was addressed in the case Attorney General of New Zealand v Ortiz [1984] AC 1, these benefits and costs to either party if the case resolution is made in foreign country as compared with the apparent country should also be a subject of concern. [1] Legal systems in most countries around the world adopt community property regime, which takes effect at the inception of marriage or at the time of divorce. For instance, California and Massachusetts in the United States have adopted community property regimes that support equal division of assets upon divorce. However, this provision...
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...Adapted from Bernhardt & Kinnear (1988). Cases in marketing management, pp. 6-16. Plano, TX: Business Publications, Inc. Pay careful attention to the following points. They are often used by instructors to evaluate either a written or oral analysis. 1. Be complete. Each area of the situation analysis must be discussed, problems and opportunities identified, alternative presented and evaluated using the situation analysis and relevant financial analysis, and a decision must be made. An analysis that omits part of the situation analysis or only recognizes one alternative is not a good analysis. Second, each area must be covered in-depth and within insight. 2. Avoid rehashing case facts. Every case has a lot of factual information. A good analysis uses facts that are relevant to the situation at hand to make summary points of analysis. A poor analysis just restates or rehashes theses facts without making relevant summary comments. 3. Make reasonable assumptions. Every case is incomplete in terms of some piece of information that you would like to have. A good case analysis must make realistic assumptions to fill in the gaps of information in the case. For example, the case may not describe the purchase decision process for the product of interest. A poor analysis would either omit mentioning this or just state that no information is available. A good analysis would attempt to present this purchase decision process by classifying the product and drawing upon real life...
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...are given. It is understandable then that we should seek out more opportunities to apply our skills and make more positive impacts within our jurisdictions. It is this general attitude that led us to get involved in investigating cold cases. How We Got Started Mark had, for several years, been consulting with our Coroner’s Division as a forensic anthropologist. During this time he came to learn that there were numerous coroners’ cases in which the identity of the decedent was unknown. These cases were kept in three-ring binders on a shelf in the Sergeant’s office. Over the years, in the course of this forensic work, we would discuss these cases and the progress that was being made on them. The conversation usually ran along the lines of us asking “any luck with that 1980 homicide victim?” and the sergeant answering “well, we’ve gotten so many new cases that I haven’t been able to even look at it yet.” This went on for a few years and through two different sergeants. One day we, as a crime analysis unit, were brainstorming about how we could broaden our “client base”, as it were. We had been successful in integrating ourselves into our Investigations Bureau and had been involved in numerous major cases. And, of course, we had always been active in producing tactical and strategic analyses for our patrol personnel. But we knew that we could be doing more, particularly given the size and responsibilities of our agency. It was during...
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...BUSINESS CASE Presented to the Accountancy Department De La Salle University In partial fulfillment Of the course requirements In ACCTBA2 (C33) March 2, 2015 A stakeholder is typically concerned with an organization delivering intended results and meeting its financial objectives. In general, a stakeholder can be one of two types: internal (from within an organization) or external (outside of an organization). The stakeholders in this situation are Lanie Marquez and Tim Rodriguez who are also partners in the retail distribution business and their capital contributions are as follows P500,000 and P300,000 respectively they are an internal stakeholder since they are also the owners. The total Capital of both stakeholders is P800,000 and with a monthly salary for both partners at P15,000 on the assumption that both of them will contribute to manage the business equally. Assuming that both managed the business equally the total salary for the year for Lanie and Tim are P180,000 each. They share profit and loss equally and no interest will be given on capital contributed. The problem for this situation is that Lanie is starting to get concerned with the behavior of her other partner Tim. He only manages the business 50% of the time, which will mean that his salary of P15,000 will need to decrease by also 50% since he does not manage the business equally with his partner. The business has seen a downturn in the profit outcome and for the current financial...
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