Managing our Risks | Fresnillo plc
Added on 2020-06-06
27 Pages4334 Words120 Views
Fresnillo Risk & Global Financial Strategy
TABLE OF CONTENTSPART A...........................................................................................................................................3INTRODUCTION...........................................................................................................................31. Assessing key attractions for Fresnillo investing in foreign countries....................................32. Reviewing 5 years trend of Fresnillo and presenting the areas of business which is likely togrow.............................................................................................................................................43. Stating the manner in which company is managing its exchange, market and commodityrisk.............................................................................................................................................11CONCLUSION..............................................................................................................................16PART B.........................................................................................................................................16a. Calculating net sterling receipts / payments..........................................................................162. Money market........................................................................................................................18B.................................................................................................................................................19b.................................................................................................................................................20b: Computing forward and future value.....................................................................................20REFERENCES..............................................................................................................................23APPENDIX....................................................................................................................................251. Share prices of Fresnillo Plc..................................................................................................25
PART A INTRODUCTION In the present times, business units are encouraged to trade or perform activities at globallevel with the motive to enhance customer base and profit margin. Hence, when business unitoperates globally then it has to face several risks in relation to exchange rate, commodityfluctuations etc. In this, firm requires sound and strategic framework which provides assistanceto it in performing activities more effectually. Moreover, the main motive of company behindglobal expansion is to enhance market share and profit margin. Thus, by preparing competentframework company can make contribution in the attainment of goals. The present report isbased on Fresnillo Plc, Mexican company, which is one of the leading precious metal miningfirms incorporated in UK. Fresnillo has attained leading position in world under the category ofsilver and gold mining. In this, report will shed light on the attraction points for Fresnillo inrelation to FDI. Besides this, it will also highlight the business segment of the company which ishighly growing. Along with this, report will provide deeper insight about how effectivelyFresnillo is managing risks.1. Assessing key attractions for Fresnillo investing in foreign countriesFrom assessment, it has found that from investment perspective in the mining sector thereare several countries in which Fresnillo can invest such as Insdonesia, China, Brazil etc. All suchare the main countries in which Fresnillo can explore its business operations and functions.When business unit expands its operations and functions at global level then it gets severalbenefits in terms of high economies of scale, maximization of profitability, tax concessions andavailability of skilled personnel (Aliyu, Saleha, Jalila and Zunita, 2016). For mining activitiesfirm requires highly skilled and efficient individuals. Along with this, when business operates atlarge level then it attains benefits in terms of cost reductions. All such aspects positivelycontribute in the productivity and profitability aspect of firm. Countries which are recognized asan attraction for foreign investment include following:Indonesia: In Indonesia, political condition is highly stable which is one of the mainattraction point that entice foreign capital. Along with this, labour cost is also low in
Indonesia which in turn places direct impact on profitability aspects in a positive manner.Thus, by considering such aspects, it can be said that for the purpose of better mining andmaximizing profitability aspect Fresnillo should focus on expanding business operationsin such country. China: From research, it has been asserted that China is number one producer of gold inthe world. Further, cost of labour is low in China as compared to other countries and italso has identified that economy of China will grow by 6.5% in the year of 2017. Cost isone of the main factors that place significant impact on the profit margin of firm. On thebasis of such aspect, by employing skilled and low salaries workers Fresnillo can gainbenefits in monetary terms. Brazil: Mining sector of Brazil has made significant contribution in the economic growthand development (What drives the price of gold?, 2017). Forecasted results or estimationsshow that GDP of Brazil will increase or grow by 2.2% at the end of 2018. Along withthis, Brazil provides investors with easy access pertaining to raw material. Further,diversified economy exists in such country which in turn less vulnerable to internationalmonetary crisis.By taking into account all the above mentioned aspects it can be stated that through investingmoney in the countries like Brazil, China and Indonesia firm can get benefit in term of bothfinancial as well as non-financial. 2. Reviewing 5 years trend of Fresnillo and presenting the areas of business which is likely togrowFinancial evaluation as per geographic location and business segment: On the basis ofcited case situation, turnover and profitability aspect of each location has been evaluated with themotive to assess risk as well as business area which is highly growing. Such assessment is highlysignificant which in turn provides deeper insight about the business entity about the area which iscontributing in organizational profitability (Allen, Macalady, Chenchouni, Bachelet, McDowell,Vennetier, Kitzberger, Rigling, Breshears, Hogg and Gonzalez, 2010). Besides this, suchevaluation also clearly indicates the areas of business that impose risk in front of Fresnillon inboth monetary and non-monetary aspects. On the basis of geographic location aspects firm isoperated in Zacatecas, Durango, aned Sonora.
Location:ZacatecasIn operation since: 155420122013201420152016Adjustedrevenue865.7588.3460.3318.6328.7SegmentProfit656.1379.5271.9150224.2(Annualreport ofFresnillo,2016)2012201320142015201601002003004005006007008009001000Adjusted revenueSegment ProfitTrend line of sales
2012201320142015201601002003004005006007008009001000f(x) = − 134.37 x + 915.43Adjusted revenueAdjusted revenueLinear (Adjusted revenue)Location:ZacatecasIn operation since: 201120122013201420152016Adjustedrevenue285.9326.3372.5468.4528.0SegmentProfit206.3211.9235295.2363.820112012201320142015201620170100200300400500600Adjusted revenueSegment Profit
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