...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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...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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...shareholders in terms offering better compensations; still many of the members of the top 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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...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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...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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...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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...differences in culture and work ethic between Americans and Japanese. It shows how each group handles conflict in the work place, as well as at home. The main characters and leaders are faced with dilemmas and have to figure out how to work as a team to keep the automobile manufacturing plant up and running smoothly. According to Western Washington University (2011), there are many different sociological differences between the Japanese and Americans. Most importantly, the views of conflict and conflict resolution differ greatly. In the United States, conflict is seen as something that is inevitable, or bound to happen, whereas in Japan, conflict is considered dangerous to all relationships and should be diffused before it begins or avoided at all costs (Western Washington University, 2011). This fact along plays a major roll in the struggles between the Americans and the Japanese at the automobile manufacturing plant in Gung Ho. The American workers almost seemed as though they were looking for conflict to solve, but the Japanese executives were quick to avoid it at any cost possible. Culture also plays a major roll in determining how the characters approached and completed tasks presented to them. In the movie, a few of the American and Japanese main characters argue about their differences in spending time with family. The Japanese say that their job is their life; it is most important so they can provide for their families. For the Americans, they preferred to spend as much time...
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...(High-Context & Low-Context Culture Styles. (n.d.)). According to Edward Hall, these cultures prefer group harmony and consensus to individual achievement. They focus more on a speaker’s tone of voice, facial expression, gestures, posture, etc. than the actual words said. Travel effect stated four reasons why American workers chose not to use their vacation time. The first reason was the dread of returning from a vacation to piles of work, followed by the belief that no one will be able to step in and do their job for them while they're gone, not being able to afford going on vacation and lastly the fear of being seen as replaceable. “Indians are more efficient. Americans believe in more action and fewer words.” (SocialPC. (n.d.)). As previously stated, there are many differences between American and Indian work culture. Americans tend to be more relaxed work wise, while Indians tend to be extremely hard working. Due to their hard work, Indians quickly learned to adapt to new cultures and are very successful in other countries. Many of the differences between American and Indian culture arise from the fact that Indian cultures are based around their religions. Americans tend to be more individualistic and live life at their own will while Indians tend to rely more on the values of religion and family. Reference Chapter 1 Lecture: High-Context & Low-Context Culture Styles. (n.d.). Retrieved from http://www.marin.edu/buscom/index_files/Page605.htm Goudreau, J. (2013)...
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...What is the American Dream? When describing the American dream, there are endless possibilities. The beautiful thing about the American Dream is that it is different for every single person. One person’s dream may be to be an NFL superstar, making ten million dollars a year. Conversely, someone else’s dream can be making minimum wage just to ensure their family can eat. This alone is what makes America the greatest country in the world. Everyone can have a different dream, but they have every possibility to achieve it. Although, it is not a guarantee the person will achieve their dream, it is a guarantee they will have no unfair regulations stopping them. A neighbor of mine at home has a very sad story that led to his pursuit of the American dream. He was one of the highest regarded Medical Doctors in Egypt. He was making great money, and his family was very happy. Then his life was turned upside down when a family member of his was killed because of his religion. He was Christian, and some radical Egyptians hate Christians, so he had to move to America to keep his family safe. His story relates to a quote on page four, “The idea of the American dream has been attached to everything from religious freedom to a home in the suburbs” (Hochschild). Unfortunately his story does not end like the Hollywood motion pictures, but he is completely happy with his current life. He now lives in a two room apartment with his wife, and two daughters and he is working as a cab driver, and...
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...English 1520 16 May 2013 American Education In the article “American the Illiterate” by Chris Hedges he argues about the growing concern on the American people. In the argument he states that Americans everyday are less and less dependent on their ability to read and write. He explains how society over all is more dependent on image based information. In his first couple of paragraphs he describes this growing epidemic. How literacy affects us as a country and as a nation over all. He brings evidence and proof about his argument from various different creditable sources. He explains that illiteracy is such a minor priority to most Americans that doing things like their taxes or electing a new president doesn’t require them to be experts in illiteracy. Bringing in emotional story and a good slogan with words like pro-life, hope, maverick, war on terror. The American people are easily manipulated and are reeled in to the fight between truth and lies. He explains that America is so blind when it comes to signing a contract, policy agreement, or a legal document. Most if not all the time they barley even start reading. It’s hard to admit but at the end even I agree with Hedges logic. Every time I download a new software or log into my bank account never have I set there and read the agreement start to end. Just the other day I was reading the fine print in my insurance contract and I was amazed at some of the things that we assume are covered like roadside assistance. I always...
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...[Type the company name] | GM588 Course Project | [Type the document subtitle] | | 6/15/2011 | INTRODUCTION United Airlines is a major airline based in the United States and one of the world’s largest airlines. It was formed in 1934. It is a subsidiary of United Continental Holdings Inc. Its headquarters are located in Chicago, IL. United is a founding member of the Star Alliance, the largest alliance in the world. On October 1, 2010 United and Continental airlines merged together forming the world’s largest airline in revenue passenger miles and second largest in fleet size and destinations. “The new United will offer customers an enhanced travel experience, combining the best products and services each carrier has to offer,” (The World's Leading Airline, 2011). The airline is suppose to be the airline that customers want to fly, the airline employees want to work for and the airline shareholders want to invest in. The key highlights of the merger are the following: * World’s most comprehensive global network, including world class international gateways to Asia, Europe, Latin America, Africa and Middle East with non-stop or one stop service from virtually anywhere in the United States * Most modern and fuel-efficient fleet and the best new aircraft order book, among U.S. network carriers * Industry-leading frequent flyer program that will provide more opportunities to earn and redeem miles worldwide * Optimal hub locations in 10 cities...
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...Additional TVM Problems: 1. Would you rather receive $1,000 today, or $2,000 in 10 years if the discount rate is 8 percent? 2. Suppose you deposit $1,000 in an account at the end of each of the next four years. If the account earns 12 percent, how much will be in the account at the end of seven years? 3. Calculate the present value of $5,000 in 12 years at a stated annual interest rate of 10 percent, compounded quarterly. 4. World Transportation, Inc., is expected to initiate its quarterly dividend of $1 five years from today and the dividend is expected to remain constant permanently. What is the price of World Transportation stock if the stated annual interest rate is 12 percent, compounded quarterly? 5. IDEC Pharmaceuticals is considering a drug project that costs $100,000 today and is expected to generate end-of-year cash flow of $50,000 forever. At what discount rate would IDEC be indifferent between accepting or rejecting the project? 6. Ernie Els wants to save money to meet two objectives. First, he would like to be able to retire 30 years from now with a retirement income of $300,000 per year for 20 years beginning at the end of the 31 years from now. Second, he would like to purchase a cabin in the mountains 10 years from now at an estimated cost of $350,000. He can afford to save only $40,000 per year for the first 10 years. He expects to earn 7 percent per year from investments. Assuming he saves the same amount each year, what must Ernie save...
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