...riskiness from the rest of the firm's assets. (Kruger, Landier &Thesmar 2011) According to Modigliani and Miller when discounting a projects cash flows, the projects risks must be adequately reflected, in the case of New Earth Mining, the riskiness of the project is not adequately reflected. New Earth is traditionally a mining company who is traditionally a precious metal mining company; the proposed project is intended to diversify New Earth’s business operations. New Earth Mining’s operations have traditionally been central to the United States of America, and denominated in USD. The new venture is in South Africa, a completely different terrain, a different governing body, a different set of legal restraints, risk of mining a different commodity as well as a different currency namely ZAR.(West 2012) A company using a single firm-wide WACC would tend to overestimate the NPV of a project whenever the project is riskier than the typical project of the company.(Kruger, Landier &Thesmar 2011) As Kruger, Landier and Thesmar have highlighted, the proposed NPV of $83 million could potentially be overestimated. Valuation 2 The Accounting Officers proposal of taking into consideration the higher risk associated with the project to be undertaken by New Earth Mining is beneficial to the company for a number of reasons, namely precautions can be observed at every stage of operation (reference). This will as well take on board the market and systematic risks prevalent in the country...
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...New Earth Mining Paper Sample APA Style 1.0. Executive summary This study gives an analysis and appraisal of New Earth Mining (NEM) company investment prospect in the Iron Ore mining industry in South Africa. It looks at the current financial position of NEM and prospective success of the investment via a subsidiary New Earth South Africa (NESA). The analysis methods delve into the estimated returns on investment by use of approximated cash flows. Results of the analysis show that the returns from the investment are likely to be positive. The case study also investigates the financial soundness of NEM and so its susceptibility to new investments (Fruhan & Wang, 2013). The company’s data used is up to date and hence it is reliable making this study meticulous. The project should commence in year 2015 with an initial Investment cost of $200 million, 40% of which will be required in early 2013 and the remaining 60% in early 2014. The investment will include construction, insurance, operating assets and will have $20m worth of working capital. $40 million of loans will be required in 2013 and $120 million of loans required in 2014 (interest accrued over 2013 and 2014 and paid in 2015). Iron ore has high demand from the steel manufacturing industry. It is mined and transported from South Africa by sea to other countries that manufacture steel. This trade has recorded a steady increase of 4.4% over the years. South Africa produces 1 billion tons of ore annually, which puts it...
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...TO: Harry Barry, CFO, New Earth Mining Inc. FROM: Jiashu Zheng - 2037 0233, Kenneth Shum - 2037 5516, Donny Kim - 2036 9046, Yiwei Du - 2039 2845, Liane Pereira - 2038 4155, Lin Gan - 2038 3499, Group 4 Financial Analysts, New Earth Mining Inc. DATE: October 7, 2013 RE: Project Valuation of New Earth South Africa (NESA) INTRODUCTION This memo addresses the feasibility of the NESA project and provides a brief overview of: our financial condition, the iron ore market, major risks associated with this project, estimated project NPV, and the benefits of the financing packages. From our analysis, the NPV of this project is $137.36M - $104.31M. While there is risk associated with venturing into an unfamiliar market in a politically volatile country, the debt financing packages mitigate this risk. Thus, we believe that the project should be accepted. FINANCIAL CONDITION We experienced growth in earnings from $98M in 2002 to $1.84B in 2011, due to improved operating margins (Appendix 1). The improvements in ROE and ROA have outpaced our competitors, implying that we are getting higher returns for each dollar invested in shareholder’s equity and assets. Although we have a more aggressive debt strategy, our D/E ratio never exceeded 50% from 2002 to 2011. Despite the slight 4% decrease in our cash and current ratios, their values are still well above one. We are still in a good financial position as we have accumulated a lot of cash and our debt is being used effectively to take advantage...
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...Assignment 3 Question 1 According to Irving Fisher, “money illusion” caused business cycles. Briefly explain. Fisher’s usage of the term money illusion is used to differentiate the real interest rates to nominal interest rates. This term basically defines consumer’s inability to realize the difference in a nominal term of a dollar to a purchasing power of a dollar, which takes into account of the inflation rate. In other words, people did not realize about the effects of inflation on their standard of living and purchasing power. For example, people were just happy with nominal increase of their wages, even though they were losing out due to bigger inflation rate. This could have been due to lack of financial education and price stickiness spotted from goods and services. Fisher believed that money illusion is somewhat the cause of business cycles. Whenever the economy is in a state of booming there follows high inflation. This causes the nominal interest rates to rise, and hence make businesses to feel that the real interest rates are also high, leading to less borrowing and investments. This however, pulls the economy down and gradually slows the economy leading to a vicious cycle. This pattern is the same for the vice versa situation. Expansions and contractions in an economy create money illusion in the process and stop each stage and reverse the economic activities. With expansionary and contractionary phases, banks have to make corresponding judgment and alter their...
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...To: CFO, New Earth From: Group 4 Consulting team: Ka Yan Michelle Au (20344951), Catherine Cho (20337067), Yutong Liu (20344878), An Li Xu (20341923), Jeffrey Wang (20342506) Subject: New Earth’s South Africa Iron Ore Investment Analysis ______________________________________________________________________________ New Earth Mining Inc. (“New Earth”) has substantial investments in the precious metals industry, specifically gold, but is facing volatile gold prices that may not be sustainable in the future. In response to this threat, New Earth should consider opportunities to diversify its business through exploration activities for other minerals. Attractive Investment for New Earth New Earth should take the opportunity to invest in the iron ore deposits in South Africa due to the following reasons: 1) It is a stable investment with long-term prospects of 15 years and a floor price of $80 per metric ton, and 2) The NPV of the project is $181.75 million, thus providing enough cash flows to cover debt and provide dividends to shareholders. Stable Iron Ore Investment The iron ore investment satisfies New Earth’s desire to diversify its business from precious metals with this potential investment life of 15 years. Prices are expected to stay over $80 per ton, with ore prices having reached a high of over $100 per metric ton in 2012. Production costs are expected to be low due to the easy access to ports from the mine location, reducing the need for infrastructure investment...
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...Western State College, my current area of focus is Professional Land and Resource Management. In these courses, experts from all across the spectrum of the energy industry have come to share their viewpoints and expertise on everything involving energy. From oil and gas, to geothermal and biomass fuel, the areas discussed are widespread. One thing that has caught my attention is the fact that a lot of this information is not widely recognized by the general public. Before I started attending the college, I got most of my information from media outlets such as television and newspapers. One thing that was rarely discussed through these outlets, however, was the science and facts that go on behind the scenes of the energy industry. The news would show a new wind farm being built in California, and how it was the next step towards establishing...
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...Policy Brief to address the issue of South Korean access to rare-earth minerals Eleonora Nam 201232133 "China controls about 95% of the global supply of rare-earth minerals, which are used in everything from consumer electronics to batteries to defense systems. In recent years the government has reduced its export quotas to secure greater control over prices...China's export restrictions on rare earths have been the focus of the international policy and market pressures in recent months." - Wall Street Journal Issue: China is the "world leader" in the reserves and "production" of rare earth minerals - raw material for the production of metals. It produces 95-97% of all rare earth elements on earth. Moreover, China does not allow the export of rare earth elements as raw materials, only finished products that are made in China. China's monopoly power in the REE market allows to influence "international affairs". As Elliot Brennan pointed out, with the increasing demand, reduced exports of Beijing in recent years is forcing high-tech companies to move to China and governments to invest in their "exploration" and "production." Most importantly, this power allows China to manipulate the prices of the rare earths, for the demand is increasing each year. Nowadays, none of the technology industry can do without the use of the rare earths, which are necessary for the production of products such as smart phones, wind turbines, batteries for electric vehicles, as well as...
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...Queensland BHP Billiton Australia: BHP battle with farmers - New South Wales Oil and Gas and Greenhouse Gases BHP Billiton globally: Re-carbonising instead of decarbonising BHP Billiton in Australia: Hero or destroyer? Uranium BHP Billiton in Australia: “Wanti” uranium – leave it BHP Billiton in Australia: Irradiating the future BHP Billiton in Indonesia: Mining for REDD a false solution to climate change Solutions? Less mining, more reuse and recycling? Moving into rare earths? Footnotes BHP Global mining operations – dirty energy investments 1 3 4 7 8 10 10 11 12 13 15 18 19 20 22 Introduction “More than 30 million people were displaced in 2010 by environmental and weather-related disasters across Asia, experts have warned, and the problem is only likely to grow worse as climate change exacerbates such problems. Tens of millions more people are likely to be similarly displaced in the future by the effects of climate change, including rising sea levels, floods, droughts and reduced agricultural productivity. Such people are likely to migrate in regions across Asia, and governments must start to prepare for the problems this will create.” – Asian Development Bank Report1 8 4 5 BHP Billiton accepts the importance of reducing carbon emissions but has no immediate intention of reducing its production of the materials which make the greatest contribution to them. 6 7 1 2 BHP Global mining operations 13 PRODUCTION OF DIRTY ENERGY MINERALS:...
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...Arizona, New Mexico and Michigan. Copper can come from a naturally formed free metallic state found in t basaltic lava as a result of volcanic activity. Or Copper can be found in oxidized ores and sulfide ores that must be mined and processed oxidized ores contain primarily copper, and can basically be melted down into copper in a smelting procress. A process in mining copper is called open pit mining in which a big hole is dug in the earth that are sometimes a few thousands of yards wide. huge machinery are used to mine copper such as giant earth movers, rock crushers even blasting with dinomites is used to move large chucks of earth. luckly we are in not gunna run out of copper any thime soon. An estimated 5.8 trillionpounds of copper known worldwide, of which about .07 trillion pounds have been mined throughout history. And of that .07 trillion is still in circulation because coppers recycling rate is higher than that of any other engineering metal. Silver, what is it and where it found? Native silver is the purest kind of silver. Native silver is a metal with nothing else added to it. Most silver is found in an ore combined with a mineral. it can be found in igneous (igneous rock is made when magma comes to the earth surface in the form of lava its is supper heated then cooled) and sedimentary ore like galena, it is formed in veins of rock that have very hot water flowing threw and around them. How and where is it mined? Silver is mined using underground mining Most of the...
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...chemical elements in the Earth's crust are associated with at least one mineral. This is how we are able to build buildings on ground and not live in floating huts. 2. What is the difference between metallic and nonmetallic minerals? Provide two examples from each category and discuss their uses. Metallic minerals are those minerals which can be melted to obtain new products. Aluminum is one of the most abundant metallic minerals on earth. It is used in the production of automobiles, construction, electrical, machinery materials. Copper also a metallic mineral is used in building construction for things such as cables and heating pipes. Non-metallic minerals are those which do not produce new products upon melting. Clay for example is used in floor and wall tile as an absorbent. Also zeolites which are used in animal feed and kitty litter. Mining 1. How are minerals extracted from the Earth and processed? A technique called mining is the way that this minerals are extracted from the earth. Mining is the extraction of valuable minerals or other geological materials from the earth from an orebody, lode, vein, seam, or reef. In the mineral...
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...Chapter 14 Review The environmental effects of gold mining can harm the environment in many negative ways. Gold miners removed enough rock to equal the weight of 50 automobiles to extract a little amount of gold. The leftover waste is piled near the mine sites and can pollute the air and nearby surface water. Mining companies also created a new mining technology called cyanide heap leaching to level entire mountains of rock. In order for them to extract the gold, they spray a solution of highly toxic cyanide salts. This cyanide is extremely toxic to birds and mammals drawn to these ponds in search of water and they can leak into the rivers posing as a threat to fish and other life forms. Geology is the science devoted to the study of dynamic processes occurring on the earth’s surface and in its interior. The core is the earth’s innermost zone. The mantle is a thick zone surrounding the core. The crust is the outermost and thinnest zone of the earth. The tectonic plates are various sized areas of the earth’s lithosphere that move slowly around with the mantle’s flowing asthenosphere. The lithosphere is the outer shell of the earth, composed of the crust and the rigid, outermost part of the mantle outside the asthenosphere. A transform vault is an area where the earth’s lithospheric plates move in opposite but parallel directions along a fracture in the lithosphere. Weathering is the physical and chemical processes in which solid rock exposed at earth’s surface is changed to separate...
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...! ! ! Group Project: Ethics of the Mining Industry Group 4 Business Ethics 04-71-300-02 Professor Singh Date submitted: March 19th, 2014 ! ! ! ! ! ! ! ! ! ! ! ! ! !1 Executive Summary This report assesses the global mining industry from a business perspective. Firstly, it begins with the history of mining across the globe and the structure of the mining industry. It then analyzes the impacts of the mining industry globally. Lastly, it addresses the issues surrounding our land—the Canadian mining industry. The research shows that the history of mining goes as far as the Neolithic era. The mining value chain presented demonstrates the formation of a mining company to the extraction of the natural resources. Further investigation shows that the mining structure is an oligopoly. Methods of analysis include an environmental analysis using PEST and a stakeholder map, which focus on the performance of a world-renowned mining company TransAlta. The finding is that management’s role is to have efficiency and productivity while maintaining ethical practices. Ethical theories are then used to look at the social, environmental and economical impacts of the Canadian industry. It is concluded that each ethical theory presents a favorable solution to each impact. Social corporate responsibility is evaluated in the last ten years in Canada and around the globe. It is found that the industry has become one of the most safety-conscious industries within Canada. The companies still...
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...Francis P. Patlunag BSME- 3 ‘Illegal’ gold mining in Leyte, Philippines Monday, Jan 16, 2012 TACLOBAN CITY-The Mines and Geosciences Bureau (MGB) in Eastern Visayas is investigating the reported illegal gold mining activities in Southern Leyte and in Eastern Samar. MGB Regional Director Roger De Dios said they have to look into these illegal mining activities as these could trigger landslides just like what happened in Compostela Valley province. De Dios said a report received by his office showed there were illegal gold mining activities in San Ricardo and Saint Bernard, both in Southern Leyte, and in Balangiga, Eastern Samar. Balangiga Mayor Viscuso De Lira said he had informed the MGB office about gold extraction in his town. De Lira, in a phone interview, said gold panning in his town were located in barangays (villages) Cag-olango and Guinmaayohan, both upstream villages. Cag-olango is about 9 kilometers away from the town center with more than 600 residents while Guinmaayohan has over 1,500 residents and is 12 km from the town proper. “I sought assistance from the MGB as to the best way to address this concern. I have yet to make a move like for a possible relocation of the people in these areas,” De Lira said. He said he could not just order the people there to relocate as it would also mean economic dislocation for them. Residents in these villages rely on farming as their main livelihood source but with a high price of gold at P1,800 per ounce, there is now...
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...and Strategic Plan Part I: Conceptualizing a New Product or Service Division of an Existing Business Mission Statement Plains Exploration & Production Company (PXP) is building a way to the future with innovation that sets new standards for the Oil Drilling and Gas Extraction Industry. Business Proposal “The world isn’t running out of oil and natural gas. It is running out of easy oil and gas,” Leber, (2012). The technology used to recover oil and natural gas from wells has not changed in the past decade. Our business model for this new division will guide PXP into the future by incorporating digital oil field technology to our existing sites both on land and water. Consumers will benefit by lower prices at the pumps, lower airfare for travel and the transportation costs for products will be reduced, making product prices lower. Offshore oil is much more expensive to extract than onshore oil. “Using traditional techniques, onshore wells can be drilled to 8000 meters compared to 5000 meters, 50 years ago. Offshore wells can be drilled in water to only 1000 meters,” (IBIS World Industry Report, 2014, p. 30). Lately, economical advantages mean the use of fracking has been reemployed over the last five years, even though it has been selectively used since the 1940’s. Using the digital oil fields will streamline production for maximum efficiency. The technological advances will cut costs as PXP maximizes response time at the mining sites. PXP could, according to IBIS World Industry...
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...Parent Company Overview Joy Global Inc. (JGI) is a mining machinery and service support company based in Milwaukee, Wisconsin USA. It consists of two operating units – P&H Mining Equipment and Joy Mining Machinery. P&H Mining Equipment specializes in the design, manufacture and support of equipment applied to surface mines. Joy Mining Machinery specializes in equipment and support applied to underground mine operations. P&H Mining Equipment History Industrial artisans Alonzo Pawling and Henry Harnischfeger started the manufacturing business that would evolve into P&H Mining Equipment in 1884 in Milwaukee, Wisconsin USA. Alonzo Pawling. Henry Harnischfeger. Pawling was a castings pattern maker. Harnischfeger was a locksmith machinist with some engineering training. Both individuals served within the Whitehill Sewing Machine Company factory in Milwaukee starting in 1881.[1] Concerned that Whitehill business operations were drifting toward failure, Pawling exited the firm to start a small gear machining and pattern making shop in 1883. Needing more gear machining expertise and capital, Pawling persuaded Harnischfeger to join his firm as an equal partner. Their Pawling & Harnischfeger Machine and Pattern Shop officially began on December 1, 1884. Components and Assemblies Suppliers Pawling and Harnischfeger initially supplied industrial machinery components and assembly service support to large manufacturing operations in Milwaukee. Their customers included industrial...
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