HA1022 Principals of Financial Markets | analysis of mineral industry
Added on 2019-11-08
25 Pages3980 Words125 Views
Running head: PRINCIPLES OF FINANCIAL MARKETSPrinciples of financial marketsStudent Name:University Name:Author Note
2PRINCIPLES OF FINANCIAL MARKETSExecutive SummaryThe report demonstrated the top up and bottom down analysis of mineral industry that leads tofundamental analysis. Selected organization for conducting the fundamental analysis is Focusmineral and Azure mineral that are the leading producers of mineral in Australian mineral sector.Fundamental analysis is evaluated by conducting the top down and bottom up analysis of mineralindustry. Background of Australia mineral sector has also been demonstrated and top downanalysis is conducted by considerations of various macro-economic factors such as inflation rate,exchange rate, gross domestic product rate and unemployment rate of Australian economy.Report presents several graphs that depicts the presentation of performance of economynumerically. Bottom up analysis of organizations have been conducted by the implementation oftool of ratio analysis. Ratio analysis is considered as crucial tool for investors in makinginvestment decisions. Furthermore, it helps in making comparison of performance of both theselected organizations of mineral sector. Later part of report details about the summary of reportand provides with the recommendation to investors for enabling them to make favorableinvestment.
3PRINCIPLES OF FINANCIAL MARKETSTable of ContentsIntroduction......................................................................................................................................6Background of Australian mining industry.....................................................................................6Mission Statement of the companies...............................................................................................7Top down analysis...........................................................................................................................8Bottom up analysis........................................................................................................................13Summary and Recommendations..................................................................................................22References......................................................................................................................................24Appendices....................................................................................................................................27
4PRINCIPLES OF FINANCIAL MARKETSIntroduction:It is essential for investors to conduct the proper analysis of organization in which theyare seeking investment. Such types of analysis incorporates top down analysis and bottom upanalysis of the industry. An investor is presented with the macro environment of the industry bconducting top down analysis. On other hand, bottom up analysis depicts the microenvironmental picture of particular organization. In the current report, fundamental analysis oftwo Australian listed companies of mineral sector is selected. These two organizations includeFocus mineral limited and Azure mineral limited. Background of Australian Mineral industry:Mineral industry of Australia is strong despite fall in price and they are the biggestcontributor of export trade of country. One of the leading mineral resource nation is Australiaand is the largest producer of primary aluminum and largest refiner of bauxite. Australia isexperiencing strong economy that is driven by low unemployment rate and continuous economicgrowth rate. As the prices of commodity is falling, mineral industry is transitioning frominvestment to production phase along with continuous expansion of export volume. Nonetheless,mineral industry ash been increasingly viewed by investors as industry having high level of risksas small exploration organizations are adversely impacted by paucity of venture capital. 60%-70% of mining software is supplied worldwide according to Mineral council of Australia andcenter for international economics. A greater interest is created in the frontier areas due totechnological development and rapid improvement in exploration of petroleum (Carlon et al.2015). This has enabled drilling of horizontal wells, mapping data of petroleum exploration anddevelopment options of diverse petroleum production that are of diverse range.
5PRINCIPLES OF FINANCIAL MARKETSMore than 50% of needs of Australia is provided by mineral sector and they are considered asessential for economic growth of nation. Overview and Mission statement of organizations:Focus mineral is the leading explorer of gold having one of the largest bank balance ofexplorer listed on ASX. The goal of organization is to ensure efficient use of capital andleveraging strong financial position for increasing the wealth of shareholders. Organization iscurrent exploring at Coolgardie and Laverton and they are continuing to reemerge as producer.Coolgardie and Laverton belt form the strategic portfolio of assets (focusminerals.com.au 2017).Azure Mineral is an Australian based organization engaged in exploration and development ofminerals. Primary activities of organization is to explore for silver, copper, gold and zincdeposits. Incorporation of company was done in year 2003 that is based in West Perth Australia.Project based work of organization is progressed in partnership with two major miningcompanies that includes Alacnran project and Promontorio project (azureminerals.com.au 2017).They intends to undertake some other development projects that involve mining, infrastructural,environment, hydrological along with social and environmental aspects. Australia has a diverse and abundant energy and mineral resources, the critical factor tothe economic success and performance is the growth of resource sector, and they are a significantcontributor to export earnings. Mineral sector is the cornerstone of the economy of country withvale of exports being made is recorded at $ 157 billion that accounts 51% of export of goods andservices. Mining sector attracted a total investment worth $ 76 billion in ear 2015-2016. Total of$ 26 billion of wage sand salaries were paid to labor from this sector in year 2015-2016. Around2280000 people are directly employed in the mineral sector and since year 2000, employment
6PRINCIPLES OF FINANCIAL MARKETSrate has been more than doubled. Export market of Australia’s energy and resources comprisedof Japan, India, China, South Korea, EU 28 and other Asia. Country has over more than 260mineral producing and gas operations. One of the biggest industry contributor toward the economic growth of country is mineralsector and resilience and tenacity of mineral sector was underlined and year 2016. However,despite the lower price or falling prices of commodities, a recorded growth in export of resourceswas delivered by Australian mineral sector. Over the recent year, there was a combination ofrelentless pursuits of productivity gains and long phase of investment. Such transition was aproof of the fact that expanded mineral sector is continuing to make a vast difference in economyof country. Growth of mineral resources along with mineral sector guarantees long-termdividend payment to nation. Australian citizens would live with high living standard and socialwelfare net that is driven by exports income, job, hundred billion of dollar in royalties and taxesand regional communities.Top down analysisOverview of Australian economy:Top down analysis of industry is done by analyzing various macro-economic indicatorsuch as employment rate, gross domestic product, inflation rate, output rate. Economy ofAustralia is considered as growing economy and there is a considerable growth in rate at 4.40%.
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