Enterprise Risk Management at Barrick
|
|
ICMR HOME | Case Studies Collection
Case Details:
Case Code : ERMT-015
Case Length : 16 Pages
Period : 2003
Pub Date : 2003
Teaching Note :Not Available
Organization : Barrick
Industry : Gold
Countries : USA
To download Enterprise Risk Management at Barrick case study
(Case Code: ERMT-015) click on the button below, and select the case from the list of available cases:
Price:
For delivery in electronic format: Rs. 300;
For delivery through courier (within India): Rs. 300 + Shipping & Handling Charges extra
» Enterprise Risk Management Case Studies
» Short Case Studies
» View Detailed Pricing Info
» How To Order This Case
» Business Case Studies
» Case Studies by Area
» Case Studies by Industry
» Case Studies by Company
Please note:
This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
Chat with us
Please leave your feedback
|
|
<< Previous
Excerpts
Overview of Risks
|
Barrick had identified various risks for regular monitoring and management -
changes in the price of gold and certain other commodities; regulatory,
political or economic developments in the areas in which it did business; and
changes in mining or processing rates.
With a large proportion of Barrick's reserve base undeveloped, the timing of
commencement of production, as well as capital and operating costs of the
company's development projects would have a significant impact on future
financial performance.
|
|
Gold and Silver Price Risk
Gold prices were volatile because the market for gold was relatively small. The
entire investment across the world in gold (bars and coinage) in 2002 was
estimated by British consulting group, Gold Field Mineral Services Ltd to be
only 449 tonnes or $4.5 billion...
Forward Sales Contracts
Barrick's forward sales program was an important tool to manage financial risk.
Barrick believed the program enabled it to plan major capital investments for
the development of new mines...
Energy Price Risk
Electricity and diesel fuel costs represented approximately 16% of the total
cash costs per ounce for 2002...
|
|
Interest Rate Risk
Barrick's interest rate risk exposure mainly related to future
contango returns in its spot deferred contracts, the fair value and
ongoing payments under lease rate and US dollar interest-rate swaps,
and interest receipts on cash balances. Barrick was more adversely
affected by lower than higher interest rates...
Currency Risk
Although Barrick operated on four continents, it did not view
currency fluctuations as a significant risk. Nearly half of its
production came from mines in the US. All revenues and most cash
expenditures were denominated in US dollars... |
Liquidity Risk
Barrick's operating cash flows were affected by the volume of gold sales, gold
prices and cash operating costs. Barrick believed it had healthy operating cash
flows. In 2003, Barrick expected cash flows to remain at levels, similar to
those in 2002...
Derivative Risk
Derivatives were an integral part of Barrick's financial risk management
strategy. Barrick did not hold derivatives for the purpose of speculation. Its
derivative program was designed to enable it to plan its operations on the basis
of assumptions that would not be jeopardized by future movements of gold and
silver prices, interest rates and currency exchange rates...
Exhibits
Exhibit I: Barrick Revenues from Forward Sales Contracts
Exhibit II: Barrick Financial Highlights
Exhibit III: Barrick Consolidated Statements of Income
Exhibit IV: Barrick Consolidated Statements of Cash Flows
Exhibit V: Barrick Consolidated Balance Sheets
|
|
