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The Charter Quest Institute

The CFO Case Study Competition 2017

STRATEGIC REPORT FOR AMANGO

MARCH 2017

Team EurekaHong Kong, China

CHEUNG Ming Yan FionBachelor of Business

Administration (International Business and Global

Management)

HUI Yee Ting CherylBachelor of Business

Administration (Law) and Bachelor of Law

LAW Ho Ching KirkBachelor of Business

Administration (Law) andBachelor of Law

WONG Yat Nam Kelvin

OVERVIEW ISSUES & ANALYSIS ETHICAL ISSUES CONCLUSION

Prioritization and Focus


ISSUE 1: Operational Risk and Industrial Action in Australia

Situation

Controlled shutdown of Australian copper mine due to faulty geotechnical design

A series of safety-related issues in the global supply chain




Situation

Bad Publicity Dropping Market Value Union Action

Controlled shutdown of Australian copper mine due to faulty geotechnical design



Evaluation of Strategic Options

1 2Resume production immediately and attribute shutdown to a minor problem

Close down the current shaft and construct a new one nearby

1-year production suspension

Injuries and cover-up worsen the current situation

High Risk of Total CollapseNPV

US$56.54 million

Seemingly mild financial and operational impacts

Improve safety standards



Implementation

Establish a safety management mechanism regarding preparation, response and supervision

Compensate for the deaths and injuries

Issue a public statement about the initial inquiries of the shutdown and measures taken to improve safety

Publish quarterly reports on regular safety inspection results of mines


ISSUE 2: Balance Sheet De-leverage or Share Buy-Back

Situation

Meeting with PICNext week

Dropping Commodity Price

MiningLaw and Charter



Situation

Strategy 2Strategy 1

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Evaluation of 2 Strategies



LIBOR rate is expected to increasefor the next few years

Evaluation of Option 1 of Strategy 2



Adopt Option 1 of Strategy 2:

Repay the medium loan in 2018 from unbundling the residential portfolio

Results in better solvency

Lowers the debt-to-equity ratio

Repay the medium loan in 2018 as the LIBOR rate is expected to increase for

the next few years

Recommendation and Evaluation


ISSUE 3: Strategic Disposal in Brazil



Situation

Asset Disposal

Programme

Received an offer

from CMOCPolitical risk in Brazil




Adopt Option 1:

Accept the offer from CMOC

Credit rating is expected to improve with less net debt

Avoid non-diversifiable political risk, exchange rate risk, economic risk

Strong bargaining power against CMOC - economies of scale after acquisition

Recommendation and Evaluation

ISSUE 4: Strategic Joint Venture Decision in Canada

Ceasing Protest Applying and Securing Permits

• Exclusion of Idle No More leaders• Little centralized leadership of INM

hinders communication

• Cephas is an international mining law practice

Effectiveness Effectiveness


Potential Benefits


1 2 43

1

2

1. Compute expected coal demand for each design

2. Compute profit for each design with

different coal prices


Configuration of Joint Venture Mining Infrastructure


3. Conduct maximax and minimax regret analysis

4. RecommendationDesign 2 Cost efficiency Financial Profitability


1 2 43

4

3

Configuration of Joint Venture Mining Infrastructure

ISSUE 5: Corporate Reconstruction and Reorganization


Situation

To streamline portfolio To expand portfolio

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Internal – APD Analysis

Favourable fit with AMANGO’s capability

Profitable by improving workplace safety and environment



External – SPD Analysis

Dominant segments in the portfolio

Potential increase in competitiveness



Recommendation

To streamline portfolio

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To reinvest in South Africa

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Ethical Issues

Operational Risk and Industrial Action in Australia

Controlled shutdown of Australian copper mine due to

faulty geotechnical design



Ethical Issues

Operational Risk and Industrial Action in Australia

Improved safety and employees’ benefits

Establish safety standards

Maintain workers’ minimum wage and basic conditions

Offer paid leaves to workers with work-related and non-paid leaves to those with non work-related injuries


Ethical Issues

Strategic Joint Venture Decision in Canada

Inadequacy of current accounting system to reflect AMANGO’s environmental

performance


Ethical Issues

Strategic Joint Venture Decision in Canada

Improved investor relations

Modern Accounting System

Use of more non-financial measures

Environmental cost allocated under process or activity-based costing


Ethical Issues

Managing Divisional Performance Group-wide


Factors

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Recommended action

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