caseism

Zeta Mining: Walking The Dragline: Case Solution & Answer

Zeta Mining: Walking The Dragline: Case Solution

A1: In the given case, there was a change in the strategy because of southern pit being not advancing for 10 years and there was no need of a dragline. The three options that Corner Horwill was left with as well as the circumstances which could occur by availing these options, are described below:

  1. To purchase a new dragline for the north pit:

Draglines are one of the most expensive machineries used for the removal of mine overburden. It costs approximately $220 million to install a new dragline in a mine which includes its fabrication, transportation and assembling. In addition to that, it requires almost two and half years for draglines to be ready to use. Hence, because of the capital and time needed for a new dragline to operate; this idea was not implemented.

  1. Walking a dragline that was supposed to be utilized at south pit:

The second option available to Horwill was to walk a drag-line that was orinally purchased to be used for south pit, six kilometers to north pit through temporarily built roads, and replacing railway line at $10 million and assembling it near the north pit.

  1. Using contractor model to strip out the overburden.

The last alternative was to use a contractor model and remove the overburden by using contactors truck fleet. This alternative was more labor intensive and a great level of staff was required to implement this model.

Since the first option was rejected after some discussions, second and third alternative were given consideration due to their viability.

A2: If I was in Conner Horwill’s shoes; I would have also assigned 9% as risk premium, because it is used by the many large corporations of the country, and it is determined at a higher company level, using weighted average cost of capital method. So, it is better to use the provided 9 % which is also availed by others.

Ans 3:  The answer to this question is provided in the attached excel document.

A4: MEMO

The purpose of this memo is to provide recommendation for the issue whose solution is being considered,i.e., whether to walk the dragline six kilometers to north pit or to use contactor model to remove the mine’s overburden. Theprovided recommendationis completely based on the NPV analysis of using both the alternatives.

As there has been a recent change of strategy in the company because the south pit is found to be no longer advancing for 10 years, and in order to increase the production in north pit; the company needs to make a quick and final decision about where the dragline should be situated. For that purpose, a recommendation solely based on NPV analysis was required. As a response to that, a deep NPV analysis of both the alternatives was conducted. The results which was derived was: if the company chooses to invest in walking the dragline alternative; it will cost the company $13941668 at present, but if it chooses to use the contractor model; it would then be required toinvest $23183630.68 at present

Since the investment required for contractor model is higher at present than the investment required for contractor model at present; therefore,the company is recommended to avail the ‘walk the dragline’ option. This recommendation is completely based on NPV analysis and does not include the external factors……………………

This is just a sample partial case solution. Please place the order on the website to order your own originally done case solution.

Share This

LOOK FOR A FREE CASE STUDY SOLUTION

JUST REGISTER NOW AND GET 50% OFF ON EACH CASE STUDY