Kamoa-Kakula Copper Investment Opportunity Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Kamoa-Kakula Copper Investment Opportunity Case Study Help

Factors influence international demand for copper

There are several factors that drive an international demand for copper, some of which are discussed below:

With an evolving technology, the primary use of copper also evolves. The prime example of these factors is the electric vehicle industry.
The infrastructural development has continuedto sustain growth in the market of copper.
Additionally, the government initiatives are also included in the drivers of international demand for the copper, which involve upgrading factories into smart factories – demand for internet of things, electric vehicles and more environmental friendly manufacturing.
According to the 2017 study conducted by the International Energy Agency (IEA), various sectors confined to fossil fuels are now becoming electrified. Which in turn results in millions of vehicles, refrigerators, air conditioners and new appliances in need of power. Much of that power could be distributed and carried by copper. Add in the international appetite for the renewable energy, such demand would most likely be surging further for solar energy systemsand wind farms.
There is a rise in the global life expectancy, but the significant threats and challenges are pushing healthcare agencies and workers to work even harder for the purpose of minimizing the public infection risks. By nature, the copper is antimicrobial, which in turn makes it one of the most ideal materials for the usage in a number of public areas, such as: gyms, schools, hospitals and so forth. In Bloomberg markets believe that the application of public health might see the demand for the copper grow by 1 million ton/ year over the forthcoming 20 years.(Mraz, 2018).

Kamoa-Kakula makes strategic sense for Rio Tinto

Referring to the financial statements of Rio Tinto for the year 2018, the profit after tax for the year is US$13925 million, which isincreased from US$8851 in 2017 and US$4776 in year 2016. The significant increase in the earnings of the company demonstrate that the company is financially able to increase the value of the firm by taking on good projects at the perfect time. The investment decisions combining with the financing decisions would most likely contribute to the creation of value for the shareholders of the company. Investing considerable amount of money, time and energy in the copper project would yield desirable profits for the company, as it is of paramount importance with anincreased global demand.(2018 annual report , 2018).

Financial aspects of the Kamoa-Kakula property in terms of risk and reward for Rio Tinto

The financial aspects of the Kamoa-Kakula property in terms of risks, are as follows:

The project of Kamoa-Kakula might not achieve the estimates of the production and the development into the commercially viable mine could not be assured.
The project of Kamoa-Kakula requires a significant development of infrastructure in order to commencemining and development operations.
The development in near future most likely depends on an adequate infrastructure. Particularly, the reliable water supply, power sources, surface and transportation facilities are the core requirementsto develop the mine. Any sort of failure to address these kinds of infrastructure requirements could impact the ability of continuing and commencing the production.
The project of Kamoa-Kakula would require substantial additional financing in the near future & it could not guarantee the availability of such financing.
The success of the Kamoa-Kakula project in meeting the estimated cash flows is highly based on the future copper price.
The cost of complying with the governmental regulations as well as applicable laws might have an adverse impact on the business’sustainability.

The financial aspects of the Kamoa-Kakula property include a strong financial return that would be generated by the project in its lifecycle. As the net present value is positive and greater than zero, it would be feasible for the company with growth and profit potentials. In addition to this, the project tends to generate widely shared economic benefits that would most likely help in uplifting the local communities.It would provide training to employees to assure that young Congolese could qualify for the number of meaningful indirect and direct employment opportunities that would be created.(Gleeson, 2019).

Learning points from the film, The Devil Operation

The filmhighlighted the significance of being highly conscious of the responsibilities towards environment and people, particularly when the world is facing a number of critical problems, which include: responsible water stewardship, climate change, broad based distribution of benefits from an extraction of mineral resources, conservation of natural resources and human rights. In addition to this, the film also puts major emphasis on best practices in building socially-responsible, environmental friendly and innovative mines.

Recommendation

Although, DRC exhibits a political instability, poor governance, weak institutional capacity, from the qualitative and quantitative standpoint, the company is recommended to pursue the efforts on the Kamoa-Kakula project. It is because of the fact that the company would generate higher revenues and the project would become the second largest copper mine of the world. In addition to this, the government of DCR is putting major emphasis on reducing the red tape, providing physical and regulatory security to the business community and simplifying the tax system.................................

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