Product details

Valkeavaara gold deposit located in northern Finland looks promising to Jackpot Mining Oy based on initial findings. The managing director of Jackpot Oy should recommend to the CEO (Chief Executive Officer) of Jackpot Mining Ltd, John Sniffgold III, whether to open the Valkeavaara mine. He has the information needed but there are uncertainties involved, including the gold price fluctuations, euro/US dollar exchange rate, and the gold content of the ore. 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? The case is a feasibility study of a project to be solved with free cash flow analysis. It can also be analysed using real options. An example solution based on simulation is included together with a traditional cash flow analysis. Sensitivities are the key to the recommendation. Equally important are parameters such as the gold content of the ore, the gold recovery rate, and the portion of high-grade concentrate to low-grade concentrate, and open pit versus underground mining costs. The case has some ground for discussion on business ethics and human resources. The case is based on a real world case and is time independent. The case supplement is available free of charge to accompany the case and contains MS Excel spreadsheets required for the case.