STRATEGIC REPORT Hong Kong, China CHEUNG Ming Yan Fion FOR AMANGO - PowerPoint PPT Presentation

The Charter Quest Institute The CFO Case Study Competition 2017 Team Eureka STRATEGIC REPORT Hong Kong, China CHEUNG Ming Yan Fion FOR AMANGO Bachelor of Business Administration (International Business and Global Management) MARCH 2017 HUI Yee Ting Cheryl Bachelor of Business Administration (Law) and Bachelor of Law LAW Ho Ching Kirk Bachelor of Business Administration (Law) and Bachelor of Law WONG Yat Nam Kelvin

Prioritization and Focus OVERVIEW ISSUES & ANALYSIS ETHICAL ISSUES CONCLUSION

ISSUE 1: Operational Risk and Industrial Action in Australia Situation A series of safety-related issues in the global supply chain Controlled shutdown of Australian copper mine due to faulty geotechnical design OVERVIEW ISSUES & ANALYSIS ETHICAL ISSUES CONCLUSION

ISSUE 1: Operational Risk and Industrial Action in Australia Situation A series of safety-related issues in the global supply chain Bad Publicity Dropping Market Value Union Action Controlled shutdown of Australian copper mine due to faulty geotechnical design OVERVIEW ISSUES & ANALYSIS ETHICAL ISSUES CONCLUSION

ISSUE 1: Operational Risk and Industrial Action in Australia Evaluation of Strategic Options Resume production immediately and attribute Close down the current shaft and 1 2 shutdown to a minor problem construct a new one nearby 1-year production suspension Seemingly mild financial and operational impacts NPV US$56.54 million High Risk of Total Collapse Injuries and cover-up worsen the current situation Improve safety standards OVERVIEW ISSUES & ANALYSIS ETHICAL ISSUES CONCLUSION

ISSUE 1: Operational Risk and Industrial Action in Australia 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 OVERVIEW ISSUES & ANALYSIS ETHICAL ISSUES CONCLUSION

ISSUE 2: Balance Sheet De-leverage or Share Buy-Back Situation Meeting with PIC Dropping Mining Next week Commodity Price Law and Charter OVERVIEW ISSUES & ANALYSIS ETHICAL ISSUES CONCLUSION

ISSUE 2: Balance Sheet De-leverage or Share Buy-Back Situation Strategy 2 Strategy 1 �� �� �� ����� ��� �� ���� �� � �� ���� � � ��� ��� �� �� �� �� ������ ���� � �� ��� � �� ��� ���� �� � �� �� � � � � � ��� �� �� �� ���� �� � � ������ �� ��� �� �� ����� ���� �� �� �� ���� �� ���� �� � ��� �� ��� �� � �� ��� � ���� �� �� �� ���� ��� � �� ���� �� � ��� � � �� � �� � �� ���� � ����� ����� � ����� ����� OVERVIEW ISSUES & ANALYSIS ETHICAL ISSUES CONCLUSION

ISSUE 2: Balance Sheet De-leverage or Share Buy-Back Evaluation of Strategic Options OVERVIEW ISSUES & ANALYSIS ETHICAL ISSUES CONCLUSION

ISSUE 2: Balance Sheet De-leverage or Share Buy-Back Evaluation of 2 Strategies OVERVIEW ISSUES & ANALYSIS ETHICAL ISSUES CONCLUSION

ISSUE 2: Balance Sheet De-leverage or Share Buy-Back Evaluation of Option 1 of Strategy 2 LIBOR rate is expected to increase for the next few years OVERVIEW ISSUES & ANALYSIS ETHICAL ISSUES CONCLUSION

ISSUE 2: Balance Sheet De-leverage or Share Buy-Back Recommendation and Evaluation 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 OVERVIEW ISSUES & ANALYSIS ETHICAL ISSUES CONCLUSION

ISSUE 3: Strategic Disposal in Brazil Evaluation of Strategic Options OVERVIEW ISSUES & ANALYSIS ETHICAL ISSUES CONCLUSION

ISSUE 3: Strategic Disposal in Brazil Situation Asset Received Disposal an offer Political risk in Brazil Programme from CMOC OVERVIEW ISSUES & ANALYSIS ETHICAL ISSUES CONCLUSION

ISSUE 3: Strategic Disposal in Brazil Evaluation of Strategic Options OVERVIEW ISSUES & ANALYSIS ETHICAL ISSUES CONCLUSION

ISSUE 3: Strategic Disposal in Brazil Recommendation and Evaluation 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 OVERVIEW ISSUES & ANALYSIS ETHICAL ISSUES CONCLUSION

ISSUE 4: Strategic Joint Venture Decision in Canada Potential Benefits Applying and Securing Permits Ceasing Protest Effectiveness Effectiveness • Exclusion of Idle No More leaders • Cephas is an international mining • Little centralized leadership of INM law practice hinders communication OVERVIEW ISSUES & ANALYSIS ETHICAL ISSUES CONCLUSION

ISSUE 4: Strategic Joint Venture Decision in Canada Configuration of Joint Venture Mining Infrastructure 1. Compute expected coal demand for each design 1 1 2 3 4 2. Compute profit for 2 each design with different coal prices OVERVIEW ISSUES & ANALYSIS ETHICAL ISSUES CONCLUSION

ISSUE 4: Strategic Joint Venture Decision in Canada Configuration of Joint Venture Mining Infrastructure 3. Conduct maximax and minimax regret analysis 4 1 2 3 4 4. Recommendation 3 Design 2  Cost efficiency  Financial Profitability OVERVIEW ISSUES & ANALYSIS ETHICAL ISSUES CONCLUSION

ISSUE 5: Corporate Reconstruction and Reorganization Situation To streamline portfolio To expand portfolio �� �� �� ��� ���� �� �� � � �� �� ���� �� ����� �� �� ���� ��� � �� � � �� ����� ���� OVERVIEW ISSUES & ANALYSIS ETHICAL ISSUES CONCLUSION

ISSUE 5: Corporate Reconstruction and Reorganization Internal – APD Analysis Favourable fit with AMANGO’s capability Profitable by improving workplace safety and environment OVERVIEW ISSUES & ANALYSIS ETHICAL ISSUES CONCLUSION

ISSUE 5: Corporate Reconstruction and Reorganization External – SPD Analysis Dominant segments in the portfolio Potential increase in competitiveness OVERVIEW ISSUES & ANALYSIS ETHICAL ISSUES CONCLUSION

ISSUE 5: Corporate Reconstruction and Reorganization Recommendation To streamline portfolio To reinvest in South Africa ������� �� ����� �� �� �� �� �� � �� �� �� �� �� ��� ���� �� ������ � � �� ���� �� �� ���� �� ������ ��� � �� �� �� � � �� �� �� ����� � � � ��� � �� ���� �� �� �� �� ��� � � � � � �� �� �� �� �� �� � �� �� � ���� ��� � ����� ���� OVERVIEW ISSUES & ANALYSIS ETHICAL ISSUES CONCLUSION

Ethical Issues Operational Risk and Industrial Action in Australia Controlled shutdown of A series of safety-related issues Australian copper mine due to in the global supply chain faulty geotechnical design OVERVIEW ISSUES & ANALYSIS ETHICAL ISSUES CONCLUSION

Ethical Issues Operational Risk and Industrial Action in Australia 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 Improved safety and employees’ benefits OVERVIEW ISSUES & ANALYSIS ETHICAL ISSUES CONCLUSION

Ethical Issues Strategic Joint Venture Decision in Canada Inadequacy of current accounting system to reflect AMANGO’s environmental performance OVERVIEW ISSUES & ANALYSIS ETHICAL ISSUES CONCLUSION

Ethical Issues Strategic Joint Venture Decision in Canada Modern Accounting System Use of more non-financial measures Environmental cost allocated under process or activity-based costing Improved investor relations OVERVIEW ISSUES & ANALYSIS ETHICAL ISSUES CONCLUSION