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Strategy and growth

Development of Strategic Options

Challenges mining companies face
As the mining industry continues to lead the world out of the latest financial and economic crisis, there has been a renewed interest in beyond-borders expansion, particularly into Africa, with all the opportunities, threats and uncertainties associated with mining on the continent. But mining investment, which is not for the fainthearted, is growing ever more complex, costlier and increasingly less certain. The risks posed by the legal and regulatory environment, political instability and the rise of resource nationalism, infrastructure constraints and scarcity of skilled labor, make the decisions about where and in what to invest, even more difficult.

In order to take full advantage of the investment opportunities which are becoming available, a thorough understanding of the project intrinsic value, as well as financial and operational flexibility is required. However, mining companies stung by negative experiences in the last downturn, are reluctant to take up these opportunities. Mining companies tend to want to buy more safely and have more compelling reasons to make an investment. They look for credible strategic, technical and financial advice to clarify areas of uncertainty and obtain the required assurance for making such far reaching decisions. And when they find it, they will reap the rewards.

While markets do not always reward every deserving company, quality deposits carry an intrinsic value and genuine in-the-know that investors need not to be convinced to “buy the resource” over the stock. Executives need to take a good look at their portfolios, processes, plans and value drivers and articulate a long-term strategy to make informed investment decisions.

How does the Deloitte solution address the business issue?
Our approach encapsulates a rigorous analysis of the prospective acquisition targets, along a range of parameters, coupled with identification and quantification of risks facing potential investments, including political risk, prevalent particularly in Africa.

At Deloitte we have found that our on-the-ground presence in most African countries plays a considerable role in our ability to understand local investment opportunities and risks. We use hypothesis formulation and testing as well as a real options approach as some of the useful tools in weighting investment options.

Benefits to your organisation
Deloitte works with our strategy, actuarial and corporate finance specialists to deliver this unique solution. Our analysis provides a comprehensive “as –is” picture and reveals potential opportunities for commercial exploitations while identifying any latent flaws or fundamentally negative aspects, which may impact your investments.

The high-level financial models help to select the optimum entry option and the risk models aid the development of mitigation strategies. Scenario planning assists in the understanding of the country-specific risks, particularly in identifying the leading indicators or triggers, thus helping to ascertain early which of a range of identified scenarios could unfold.

Contact
Jacek Guzek
Tel: +27 (0)82 940 6896
Email: jguzek@deloitte.co.za

Building the Growth Engine

Challenges mining companies face
CEOs are often surprised by the size of their companies’ “Growth Gap”—the difference between the revenue growth they can deliver through the current business versus the revenue growth they need to deliver (or have committed to delivering).

How does the Deloitte solution address the business issue?
The Growth Engine is not about the “what,” but the “how.” Deloitte member firms are in an ideal position to build, maintain, and run your Engine more so than any other service provider. Due to our organisation’s vast, global reach and the resulting deep industry and market insights enables us to:

  • Assess opportunities
  • Set targets and criteria
  • Design, develop, and deploy
  • Provide support services and tools

Benefits to your organisation
The Growth Engine can provide you with:

  • A market intelligence network to proactively scan for emerging opportunities;
  • A mechanism for filtering through many ideas to highlight the most valuable and viable ones;
  • A means for measuring an idea’s potential for impacting revenue growth, profitability, and shareholder value;
  • The capability to repeatedly plan, commercialise, and manage a portfolio of new businesses.

Contact
Thomas Jankovich
Tel: +27 (0)11 209 8839
Email: tjankovich@deloitte.co.za

Business Case Design

Challenges mining companies face
Mining houses constantly seeks avenues to expand their asset base, increase revenue contribution and ultimately total shareholder return. Therefore, there is a constant need in scanning and developing business cases for new areas of growth, while testing various scenarios in a quest to obtain optimal value.

How does the Deloitte solution address the business issue?
There are countless case studies of projects that have progressed through the initial project life-cycle stages, only to be recycled back to concept phase, as a result of sub-optimal option selection. The significance of making incorrect decisions in the early phases of the project development cycle normally results in the need for a rework and causes unnecessary delays. The application of a structured approach to the project definitions, termed business case design, could increase project ROI and prevent unnecessary rework.

Benefits to your organisation
Scanning various large capital invested business opportunities and their respected options and permutations thereof can seem to be a daunting task. Decision makers can easily be misled on the wrong growth path without a well-structured and robust business case development approach. Value is added by providing decision makers with piece of mind that optimal value has been highlighted and key risk been identified.

Contact
Louis Kruger
Tel: +27 (0)11 209 6444
Email: lokruger@deloitte.co.za

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