New Earth Mining: Financial Analysis

ew Earth Mining is one of the largest producers of precious metals in the U.S. While the firm operates mines primarily in the U.S. and Canada, it has also made substantial investments in gold exploration projects in Australia and Chile. New Earth has been very successful and has a large amount of cash on the balance sheet, a simple debt structure, and a reasonable leverage ratio with no risk of liquidity. With a strong financial position, the firm considers reducing its dependence on precious metals by diversifying into base metals and other minerals. An investment opportunity for mining iron ore in South Africa looks promising but still carries substantial risk. A high risk of civil war in neighboring countries along with strong fears that the South African government will nationalize mining operations combine to create an unstable political environment. The tentative financing package is complex and creates challenges for determining a value for the project. Students must complete a quantitative analysis of 4 proposals with different valuation methods before making a final recommendation.

Keywords: capital budgeting; international business; Return on investment; mining; Risk and Uncertainty; Risk Management; Valuation; Investment; Diversification; Mining Industry; Australia; South Africa; Chile; Canada; ntroduction- New Earth Mining is one of the largest producers of precious metals in America. The firms operations are primarily in America and Canada, but it has also made expansions in Australia and Chile regarding investments in gold exploration. New Earths balance sheet presents a large amount of cash, will further analysis showing a simple debt structure, and a reasonable leverage ratio with no risk of liquidity. New Earth has a strong financial position shown in basic accounting concepts which leads to the conclusion that New Earth has been very successful. New Earth wants to diversify into base metals and other minerals, rather than depending on