eCase Collection - abstracts
| status: active
Gasiorowska, Anna (supervisor)
2003, time independent Mining, gold Finland, EU (European Union), Small|
Capital cost and structure; Cash flow; Environmental considerations; Ethics; Feasibility study; Geology; Goldmining operations; Human resources; Investment cost; Mining operations; Price fluctuations; Project management; Real options; Risk evaluation; Uncertainty, diversified
Valkeavaara gold deposit is located in Northern Finland about 1,000 kilometres from Helsinki.
Practically all gold produced in Finland is enriched from ore containing other metals, like
copper. Gold is only a side product. There is only one other operational gold mine in Finland
The claim at Valkeavaara looks promising to Jackpot Mining Oy. The initial finding with 6 g/t
gold ore content was good but since then the estimate came down to ca. 3 g/t, which may still
Managing director of Jackpot Oy faces a decision of recommending to the CEO of Jackpot
Mining Ltd John Sniffgold III wether to open the Valkeavaara mine. He has the information
needed but there are uncertainties involved, including the gold price fluctuations, EUR/USD
exchange rate and ore gold content.
To make matters more complicated, Mr Karjalainen’s decision has political implications as well.
Unemployment in the area is very high and the Finnish state is ready to grant a subsidy to the
mining operation. If Mr Karjalainen turns this offer down, will he still be invited to the Prime
Minister’s crayfish party in the future?
Valkeavaara case is a straightforward project evaluation to be solved with free cash flow
analysis. Alternatively the case can be analyzes using real options. An example solution based
on simulation is included together with a traditional cash flow analysis.
The case has some ground for discussion on business ethics and human resources.
Opetus-materiaali (teaching note):
Teaching note, 16 pages.|
Case on saatavilla ecch case collection