Discussion 1 New Earth was presented with a unique opportunity to expand their footprint, as well as venture into an arena that demonstrated strong growth. Not only was growth attractive, but the customers that were willing to take the iron ore that New Earth was exploring to mine. As our society continues to grow and innovations continue to take us by storm, it is no wonder that New Earth was exploring the idea of jumping at an opportunity to add to their portfolio. With that being said there are two very important directions that New Earth had to explore before making their decision – qualitative and quantitative approaches. With any new venture, home must be done before determining if this is a power move, or a move that could cost New Earth in a negative way. Exploring the quantitative approach it is easy to see the attractive iron ore price points and potential for New Earth, as well as the quantity that is available for them to source out too. With an increase in demand, and with key transportation points this opportunity appears to be the right one. “Given the high quantity of iron contained in ore mines in South Africa and the easy access to ports from the mine location, the venture was expected to have low production costs” (Wang, 2013). From the qualitative side there are several key topics that stand out in regards to this potential venture such as the geographical location of the iron ore. Being that it is located in South Africa, and the hostile environment surrounding its location can make this venture very dangerous and risky. In addition, one of the most attractive research for this venture would have to be when the outside firm, Drexel Corp. highlighted the potential volumen of iron ore and the payouts. It is attractive, and would get most potential investors heads turning; however, with political and environment risk it can place a large shadow over all the dollars that are available. “The engineering firm found that the field contained 30 million tons of ore...At the projected extraction rate of 2 million tons per year, it would take 15 years to deplete the ore body” (Wang, 2013). Overall, the risk and interest that New Earth would have to pay out, along with the potential for the government to get involved and begin regulating the situation, I believe it would not be a sound investment if you were to follow Approach Four. This does not seem attractive, nor does it seem condusive to what New Earth is looking for at the end of the pay day. Discussion 2 Upon reading the case study regarding New Earth Mining, Inc. (NE), there is plentiful amounts of information concerning both quantitative and qualitative measures. I believe qualitative information is a great place to start as it more often than not it will provide you with the basis of the matter at hand, and in this case, where NE stands. NE is a major precious-metal producer who flourished financially during gold's exponential increase in value in the first decade of the 2000's. According to NE's balance sheet, they display strong cashflow, earnings, and standard levels of debt giving them great opportunity for expansion (Fruhan, Wang, 2013). Being worried about the sustainability of gold's price levels, NE sought out new investment opportunities to promote expansion in different venues rather than through acquisition of smaller companies in the same arena (Fruhan, Wang, 2013). Iron ore bodies in South Africa was what NE chose to pursue as they saw stability through future demand, and shortage of skilled labor globally (Fruhan, Wang, 2013). The formation of New Earth South Africa (NESA) was the end result after securing deals with buyers in China, Japan, and South Korea. After analyzing the qualitative information, there were a few major quantitative measures that were crucial. Beginning first with NE's decision to go with iron ore production, Drexel Corporation reported 30 million tons of ore with an average iron content of 60% to NE making South Africa a prime target (Fruhan, Wang, 2013). They calculated that at 2 million tons of extracted iron ore per year, it would take 15 years to deplete at a cost of $200 million (Fruhan, Wang, 2013). Securing financing was key in giving the projects life as a total of $40 million in loans were to be provided in 2013, with another $120 million at the beginning of 2014 (Fruhan, Wang, 2013). I believe looking at Exhibit 4 in regards to NPV at various discount rates shows what NESA would need to be successful. If Iron Ore stays at $80 dollars which they are using for their estimates, then any discount rate surpassing 20% will send NE in an unprofitable direction. Fruhan, W. E., & Wang, W. (2013, October 11). New Earth Mining, Inc. Harvard Business Review. answer each discussion separately-Compare their views with your own in terms of what information is most important. Are there elements your peers have omitted? Provide reasoning to support your views. -2 Pages( 1 for each discussion)-APA format and citations-2 references
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