Resolute Mining Limited

This business analysis is aimed at gaining significant information on the level of success of the firm and the presumed level of competition it is facing in the market. It will give substantial information concerning the competitors of this firm. The report will also look at the macroeconomic environment in which the business is based. This data in totality will help in the prediction of future performance of the business.

Running Head: Resolute Mining limited 1
RESOLUTE MINING LIMITED
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Resolute Mining Limited 2
This business analysis is aimed at gaining significant information on the level of success
of the firm and the presumed level of competition it is facing in the market. It will give
substantial information concerning the competitors of this firm. The report will also look at the
macroeconomic environment in which the business is based. This data in totality will help in the
prediction of future performance of the business. It is also vital for the firm while coming up
with its policies. These are policies that may be useful in curbing any form of a decline in their
success or production.
1. Introduction to the business and general business environment
Resolute Mining Limited is a foreign-owned organization that is involved with mining of
gold and also searching and exploration of minerals. The company has over seven hundred and
forty employees and usually operates in Mali, Australia, Cote d'Ivoire, Egypt and Ghana, and the
head office is based in Perth. (Avery, 2013) At the moment it operates two main gold mines. The
first one is the Ravenswood gold mine located ninety-five kilometers southwest of Townsville in
Queensland, Australia. Ravenswood sources its gold ore from the East open pit and Mt Wright
mines. The second one is the Syama gold mine located roughly three hundred kilometers
southeast of Bamako in Mali, West Africa.
Resolute mining limited has been involved in the production of gold its exploration,
innovation, and development. Over the years, the company has operated nine gold mines across
Africa and Australia, which has led to the production of more than eight million gold ounces.
Consumers
The main customers of Resolute Mining Limited are government departments and private
firms. Governments use gold as a store of wealth. The private organizations use gold in the

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production of valuables such as ring chains and other forms of jewelry. Gold can also be used in
electronics as well as an ornament to reward those who uplift their country’s flag high.
Organizations can use gold as a store of wealth or use it in the production of valuables such as
ring chains and other forms of jewelry.
Their customers are mainly located in India, China, United States, Saudi Arabia, Turkey,
and Indonesia.
Competitors in the business and their market share and location
There exists are a number of firms who undertake the same business course as the
resolute company, that is mining and extraction of minerals and distributing them for sale. The
number of such company is quite high globally, but there are a few of these firms which are
within the range of products with the resolute business company and which acts as a threat to it
in economic approach.
The main competitors to the resolute organization in the mining industry include the west
gold resource-limited, Aurelia metals limited and sand fire among other mining organizations.
These are the companies that are seen to be commanding the gold mining business significantly.
West Gold Resources Organization is located in Murchison goldfields around the regional town
of cue in West Africa. The company's gross income level is estimated to be three hundred and
seventy-two million. It has offered jobs to more than eight hundred and twenty-nine persons (Paul
Cleary, 2012).

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The other company considered as a close contender to the resolute company in the
mining industry is Aurelia metals limited. The organization is located in western New South
Wales, an estimated distance of 100 kilometers southeast of Cobar. The company involves itself
with the exploration and mining of gold, and tin. The company's gross revenue is approximated
to be at two hundred at forty-seven million A$. The organization has also provided jobs for over
five hundred and seventy people.
Another close rival of resolute mining limited is sand fire resource limited. The company
produces and sells gold and copper. This firm is located in Western Australia. It collects a gross
revenue level of six hundred and eight million, A$. The firm has also given jobs to around nine
hundred people.
These firms have significant market command in the mining and exploration of minerals.
Each holds substantial market share in the mining industry. Resolute Mining Limited commands
an approximate fourteen percent holding, while the Sand fire limited is proposed to have a
significant share of around twenty percent of the market. On the other hand, Aurelia has an
approximate of eight percent share of the market share (Rasmus Ankersen, 2012).
The West gold resources organization commands an estimate of ten percent share in the
market and the other mining companies’ shares the remaining forty-eight percent share of the
market.
Market structure
There exist various forms of market structure that can be used to categorize an economy.
The most common forms of the market structure include perfect competition, monopoly
monopolistic competition and oligopoly (Stackelberg, Bazin, Urch, & Hill, 2011). Putting into

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Consideration the kind of competition evident in the mining industry, the market environment
that these firms operate on is closer to a perfectly competitive market structure than to monopoly.
This can be attributed to the fact that in the mining industries, there is a wide range and a large
number of buyers and sellers.
Mining is not controlled by a single seller but there are quite a number of firms
undertaking the course of mining and extraction of gold and other major minerals. Again the
customers involved in the purchase of gold and other major minerals are well informed about the
future, present and past information about the prices in the market. Rarely would a gold
consumer make a choice to purchase it without having knowledge on relevant information.
Similarly, the price of gold in the market is determined by forces of demand and supply
(Steven E Landsburg, 2011). Prices are not predetermined by an individual seller or a firm, thus
making the firms' price takers. It’s also worth noting that all the firms in the mining industry sell
homogeneous products, that is gold and the other minerals. The fact that these firms are
competing for the same available resources and market scope is also an aspect that makes the
market structure be closer to perfect competition (William A McEachem, 2011).
Substitutes of gold
Gold has a number of close substitutes in the market. These are metals which are
considered almost as valuable as gold. Such metals include copper, silver, and platinum.
Platinum has properties similar to those of gold, which makes it a close substitute of gold. Such
include that is it can be used in industries as a catalytic converter. Platinum is also used in
making of luxurious items such as jewelry of different types. The current market price for

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platinum is around $800. This makes it slightly cheaper than gold while it also has almost similar
properties with gold.
Another metal that is a close substitute of gold is palladium. Palladium is among the most
precious and rare metals globally. This metal is used in the manufacturing of commodities such
as computers, smartphones and many more. Its rare nature and its usefulness in electronics attract
a lot of investors due to the good commodity market available. Although it does not have
properties similar to those of gold its usefulness and how it attracts investors makes it a close
substitute of close. It drains investors out of the gold mining industry. The market price of
palladium is $200.
Silver is another close substitute of gold. This is because silver has similar uses to those
of gold. Silver can be used in making of jewelry. It provides a diversifying ground for investor
protecting them from the risks that may arise in the gold market. The market makes value for
silver is $30.
The actuality of gold having several close substitutes, and the presence of (Aisen & Jose
Veiga, 2011)other firms in the market have a significant impact on the firm’s demand curve.
Availability of these substitutes makes the demand curve an elastic demand curve. This implies
that the purchase of gold is dependent on the substitutes' availability. A significant increase in
gold prices by the firm above the marginal cost will lead to the reduction in the demand for gold.
This is because customers will shift to consumption of the other substitutes of gold whose price
is relatively lower as long as they serve the same purpose.
Similarly, the presence of several firms in gold mining industries in the market affects the
firm’s demand curve and makes it elastic. This is because if the resolute company raises their

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gold price above marginal cost, it will lead to investors and customers shifting to other firms who
are selling it at a price lower or equal to the marginal cost (Felina C Young, 2008).
Additionally, the price level of gold affects its demand, an increase in the price level will
lead to reduced customer’s purchasing power. If the firm increases the price level so as to be
greater than the marginal cost, this will lead to a great reduction of their customers. Mining
industries are price takers and the price of the commodity is always equals marginal cost.
2. Production costs and scale
(i) Factors of production
Factors of production refer to inputs used in the process of producing a good or a service
by an individual or firm aimed at the generation of profit (Miller, Vandome, & McBrewster, 2009).
In mining, these factors include manpower, management, capital, equipment, and mineralization.
They can be further categorized into either fixed or variable factors. Fixed factors of production
are those inputs that do not deviate with changing the level of output whereas variable factors of
production of production the inputs which certainly change in relation to the total output
produced.
(ii) Production cost
Fixed cost does not change with changing the level of output (Arnold, 2007). These may
include insurance policies, set up cost, rent and such. Variable cost, on the other hand, is the
production cost that changes with deviation in total output. This cost is incorporated in the cost
of equipment, raw material cost, and labor cost.

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Resolute Mining Limited production cost has reduced over the years. This can be
attributed to general technological advancement in its mining activities. The total cost of
production is estimated to be at.A$1280 per ounce. In the financial year 2017, the company's
gold mines were approximated at 329,834 OUNCES implying that the total production cost was
around A$ 442,187,520. The fixed production cost for the financial year 2017 was A$
100,000,000. This cost includes payment of executive and non-executive directors of the
company, medical and risk insurance policies, rent and many more.
The variable cost for the company for the financial year 2017 was A$ 342,187,520. This
includes the cost of raw material, labor workforce, the cost of processing raw material to finished
goods and the cost of transportation of gold to customers. The firm’s variable cost is greater than
its fixed production cost. (Wellmer, Dalheimer, & Wagner, 2008) This implies that the firm enjoys
economies of scale and this could be due to the fact that it operates on large-scale manufacturing.
3. Macro business environment
These are the surrounding uncontrollable conditions or factors that have an influence on
the decision making of a firm and impact its performance and plans. These factors may be
demographic, economic, political or social conditions (George E Kroon, 2007).
(i) Political stability
The political stability of a country has a significant impact on the business undertakings
of any firm. The resolute mining company is mainly based in Australia .the country enjoys

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relative economic stability. This political stability means good for the operation of any business
activities (Aisen & Jose Veiga, 2011). It transpires to the affluence of undertaking merchandise in
the country, with a low level of corruption and very high support from the government.
(ii) Inflation levels
Inflation refers to the persistent rise in the general price level (Robert E Hall, 2009). Higher
inflations rates affect the business activities negatively. Over the years Australia has been
operating on low inflation rates, having a range of one to three percent. The current rate of
inflation in Australia is 2.20 percent and with the trend, it has been following it is expected to be
at around 2.52 percent by the year 2021. The low levels of inflation rates make the business
environment conducive for the resolute mining company and could foster its success.
Australia through the intervention of its reserve bank has been able to maintain low-
interest rates. The average interest rate level in Australia is currently at 1.5 percent. Lower
interest rates could foster the success of the resolute mining business. This is because lower
interest rates enhance borrowing for spending or expansion by organizations.
The major customer base for gold is China, Indonesia, Saudi Arabia, and India. The level
of inflation and average interest rates significantly impacts the business decision and affects its
progress. It is, therefore, necessary to evaluate these factors. In China is at 1.8 percent while the
level of unemployment stands at 3.9 percent. The average interest rate is 4.35 percent. India
experiences an unemployment rate of 7.8 percent. The current rate of inflation stands at l4.3
percent while the average interest rate is 6 percent.
In Saudi Arabia has inflation levels being negative 1 percent, the unemployment rate is at
5.9 percent while the interest rate is 2 percent. Indonesia has an inflation rate standing at 3.8

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percent, the level of unemployment is5.5 percent while as the interest rate levels are4.25 percent
(Sylla & Homer, 2013).
The economy of Australia is not necessarily experiencing a boom or a recession. It is
undergoing growth even though the growth is at a very low rate. Australia is experiencing
population growth and a slight increase in the GDP averaged to be at 2.4 percent a year.
(iii) Exchange rates
One Australian dollar is equal to 4.85 Chinese Yuan. One Australian dollar is equal to
51.17 Indian rupees, one Australia dollar is equal to2.67 Saudi Arabian riyal and lastly, one
Australian dollar is equal to10, 547.49 Indonesian rupees (James, Marsh, & Samo, 2012). High
levels of inflation would have a significantly negative impact on the business, this is because it
would lead to an increase in the cost of production hence leading to an increasing price of gold.
In this case, the inflation rates of involved countries are maintained at very low levels hence
cannot have substantial negative impacts on the business.
Gold is a luxurious good, its demand is affected by business cycles and the economic
condition of the countries in which its customers reside in reflects in its demand (Krumm, 2011).
Even if demand would fall if the economy faces recession the change in demand would not be
proportional, that is there will be just a slight change in the quantity demand (Kirst-Ashman, 2010).
The current trend of exchange rates are good or the business, they do not show a likelihood of
large fluctuations.
4. Sustainability practice of the business

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In the process of production of final products, there are some residues that are usually
emitted by the firms. These residues may consequently impact other outside parties either
positively or negatively. When negative it’s a cost to the outside party while in a case where it is
positive it incurs a benefit. This type of effect is referred to as an externality and is not reflected
in the market price of the final good or product (Surinach, Moreno, & Vaya, 2007).
In the process of mining and extraction of various minerals in Australia, there are some
negative externalities are produced which can be explicated in terms of water and air pollution,
land degradation vibrations, and solid waste.
(a) Solid Waste:
The process of mineral extraction is usually linked to the massive generation of solid waste. This
could be in form of tailings, slimes and overburden dumps. Residential areas surrounding mining
and smelting places are in most cases dirtied by metals. (Bech, Bini, & Pashkevich, 2017)The
compact waste which comes from this process at most times leads to soil pollution, significant
damage to fertile grounds and erosion.
(b) Vibrations:
During mining, rocks require to be fragmented. This, therefore, calls for use of explosives in the
mines to blast the huge rocks. Air-blasts and ground vibration cause annoyance to people who
reside near the mining areas. These vibrations of also bring about damage to external surface
structures.
(c) Health Hazards:

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Human health is usually affected by the dust particles present in the air. Workers may suffer
from skin and lung diseases as well as vision and breathing problems. Wrong use of minerals is a
threat to human life (Mills, 2010).
(d) Air Pollution:
Miming activities also violate the value of environmental sustainability through pollution of air.
This is mainly brought about by combustion of fossil fuels, fossil fuel like sulfur dioxide,
burning of the automobile and industrial fuel. Similarly, refinery operations and combustion of
coal pollute the air as they lead to toxic emissions and production of soot and dust respectively.
From the mineral treatment plants and concentrators installed in lead, copper, gold, zinc,
chromite and iron ore mines usually, produce lots of slimes/ tailings.
(e) Water Pollution:
Pollution of water bodies is a normal externality linked to mineral production activities.
In areas where mining takes place, in event of heavy rains overburden dumps are usually carried
away. (Holden & Jacobson, 2013)Chemicals disposal and abandoned mines in mining areas are the
major causes of water pollution.
The government intervenes in the correction of externalities by taxing the companies that
create the externality and by putting up regulations and laws that give guidelines on the allowed
amount of pollution and taking action on violators (Azcue, 2011). Resolute Mining Limited places
importance on the responsibility of dealing with negative externalities. The company has
engaged in training and mentoring their workforce so as to help maximize the value of
sustainability and lower sustainability risks.

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In conclusion, therefore Resolute Mining Company is still competitive in the mining
industry despite the high level of competition. Being located in Australia has proved to be a vital
factor contributing to its success now and in the future. This is because the country enjoys
political stability, has low-interest rates and a controlled level of inflation. Even while
maintaining its success, the company is also concerned with upholding environmental
sustainability.

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