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Assig

FJE Limited

Acc 100 S2 2011

Background
FJE Limited (FJE) is a small public company that is planning to list on the ASX. Prior to listing they need a business plan to help prepare the prospectus. The directors of FJE have come to you for help in preparing it. Prior to your first meeting with them, you and your three partners do some research on FJE and the directors. You find that FJE has just changed from a private to a public company in preparation for the listing. It has uranium exploration leases in two Central African countries Niger (Tahoua region) and Mali (Gao region), as well as a few small uranium prospects in the Wiluna area of Western Australia. These three areas, while looking like very good exploration possibilities, have not yet been explored by modern methods. The last time the African prospects were investigated was in the 1950s by French explorers, who pulled out as the conditions were difficult, even though what they found was promising. The Wiluna properties have only ever been examined for gold and none of that was found. The directors of FJE are all experienced directors of exploration companies, and consist of 2 well known mining entrepreneurs (John Lewis FAICD, Chair, and Richard Adams CPA who is also the company secretary), an experienced uranium geologist (Rebecca Paulka) and a director that knows the African prospects well - Andr Traor. The company is well capitalised, holding approximately $4m (AUD) in the bank and no debt. In line with industry practice for early stage junior explorers no actual work has yet been done on the prospects and the company has no employees other than the accounts clerk, Lynn Hopkins.

FJE Limited

Acc 100 S2 2011

Memorandum
TO: FROM: SUBJECT: DATE: CC: CONSULTING TEAM JOHN LEWIS PROSPECTUS PREPARATIONS 3/8/2011
TO FILE

I attach are a number of serious issues and possibilities relating to FJE that need to be addressed prior to the listing. The operating and strategic situation relating to the business needs to be examined while answering the questions attached. Outlined in the attached document are also a number of opportunities that may enable us to improve our prospects at listing. We need you to perform some analysis on these opportunities and let us know your recommendations. I look forward to reading your analysis and summary. Keep it short but answer the questions we ask and address all the issues you feel important. All amounts in this document are in AUD unless otherwise stated. Please address each of the tasks outlined in the attached document and present your calculations and recommendations. Use an executive summary to make it easy to read and all calculations should be in appendices. I need this to be in report format. You are expected to do research on any items you do not know, and this needs to be correctly referenced, as I need to know where you got your information from. In order to take advantage of these opportunities I must receive your report by 5pm Monday, 5 September. Submissions received after this time will attract a penalty of 10% for each day that they are late. I look forward to reading your report.

John Lewis
Chairman

FJE Limited

Acc 100 S2 2011

Task One Strategic Plan


To maximise the potential of our business I would like you to prepare a strategic plan, specifically I would like the plan to incorporate a mission statement, a SWOT analysis, a list of objectives and at least one strategy to help meet each of those objectives. Prepare a brief explanation of why you have included each of the items identified in your SWOT analysis. This strategic plan is likely to drive the early stage of our development and will be used to make sure we are ready for our listing, expected in 24 months. We therefore need you to be honest but do not make it long, in depth or complex, as the situation is likely to change quickly as any exploration is done. Your SWOT, objectives and strategies need to be developed with the other tasks set in mind, so I would recommend that you complete the other tasks first before doing the strategic plan. Any research you do in developing your business plan will be viewed favourably, but please ensure that any sources that you use are adequately acknowledged.

FJE Limited

Acc 100 S2 2011

Task Two Cash Budget


We need to have done some exploration work on all of the major projects for inclusion in our prospectus, but of our $4m we need at least $1m in the bank to pay for all the listing expenses and to ensure we have a reasonable amount of cash in case anything goes wrong. This means that $3m can be spent on all activities in the lead up to the listing. We therefore need a cash budget to ensure we spend appropriately what we have. Revenue Our only source of revenue will be the interest on the money in the bank, so please make sure this is well invested and safely. We will, of course, need this included in the budget. Costs Maintaining our Perth office, including paying the accounts clerk, costs about $15,000 per month. Directors fees total $30,000 per year. Directors normally fly business class to and from Mali and Niger so some flights to and from should be included, as should reasonable hotel, vehicle and meal costs while there. We believe that at least 10 visits, each of at least a week, will be needed between all the directors to adequately oversee operations there. Conditions in Wiluna will be much better, so our geologist will need to visit three times and one other director only once, also for a week each, over the period. Please include a reasonable estimate of these costs in the budget, and let us know which airline we should be using for each of these. These trips will be spaced out evenly over the next 24 months. The remainder of the money will form our exploration budget, which you do not need to divide up by purpose (that is for our geologist to do), but will start to be

FJE Limited

Acc 100 S2 2011

spent from October onwards. Keep in mind that working in the Sahara might be seasonal, so the costs are likely to be much lower when we cannot work.

Required
Prepare a monthly cash budget, starting in September and going through to the likely listing date, showing expected cash inflows and outflows and, as a separate line item, the amount that can be spent in the month for exploration activities. This should not be a complex budget, but be kept as simple, and short, as possible, while showing what your assumptions are to arrive at these numbers. The results of the other tasks will need to be considered when preparing this budget.

FJE Limited

Acc 100 S2 2011

Task Three - Aeromag


Our geologist, Rebecca Paulka, has estimated from the earlier exploration that the Malian prospects have a 30% likelihood of containing economic quantities of uranium ore, the Niger properties have a 25% likelihood but the WA prospect has only about a 10% likelihood of containing economic ore. The directors have therefore decided to concentrate exploration activities in Mali and Niger. The discovery of an economic ore body is likely to be worth about $30m to FJE as we can sell it on to a larger company. Rebecca has said that the best way to start would be to conduct an aeromag survey in both Mali and Niger, and Andrs advice is that this would cost about US$100 per square kilometre in both countries. An aeromag equipped aircraft would be available in about 3 months in Mali and in about 2 months in Niger. Set up costs would be about $20,000 in each case. We have about 1,500km2 of exploration territory in each of the two countries and a survey would only take a few days. Rebecca would do the analysis as part of her normal work.

Required
After performing some quantitative analysis and keeping in mind the risks, recommend whether either or both of these activities should be undertaken. Your recommendation(s) will need to be incorporated in the cash budget.

FJE Limited

Acc 100 S2 2011

Task Four - Wiluna


Regulations on mining leases in WA include requirements to spend some money each year to keep the leases. To keep our leases near Wiluna, the money to be spent will be about $100,000p.a., but expenditure can be delayed by up to one year. In this area we have 400 km2 of leases. Firstly, we are not sure whether these leases should be kept if we need to spend this money to keep them. Secondly, if we are to keep them, we will need to decide how much to spend on them. The previous owners of the leases, in searching for gold, did some aeromag surveys years ago that identified some areas that may be of interest to us. From discussions with them, we believe that conducting a drilling program of about 15,000m, using a RAB rig at a cost of $6 per metre, would let us know whether the targets are worth exploring further. Set up costs would be of the order of $5,000. A rig would be available in about 2 months after placing an order. We would need to buy the survey results for about $10,000. Another option would be to re-fly the surveys, at a cost of $60 per square kilometre and, using more modern surveys, we estimate that the amount of RAB drilling could be reduced by about a third to achieve the same results. There would be no set up costs for the survey and it would take about 2 months for a plane to be available.

Required
1. Make a recommendation, based the likely value of these leases, on whether we should keep these prospects. 2. Whether your answer is yes or no, use a normal method of project evaluation to determine whether the exploration should be undertaken and which option should be taken.

FJE Limited

Acc 100 S2 2011

Task Five
We have been offered some further leases in Niger. Rebecca considers that this new ground is not quite as good as our current holdings, with a 20% chance of holding an ore body worth at around $30m. Having both leases may make some sense, however, as any fixed costs could then be spread over the new area, which would double our current holdings. We would need to do the same survey work on this increased area as we would have on the old area. The new territory is likely to cost us US$1m to acquire and will mean that Andr will need to make one extra trip to Niger. This offer can be taken up at any stage in the next 6 months, but it will not be extended after that.

Required
Based on the costs, the cash budget and the risks associated with this possibility provide us with a recommendation as to whether we should proceed with this.

FJE Limited

Acc 100 S2 2011

Task Six
The directors have also been in discussions with a group looking to sell some mineral prospects in the far south of Algeria, and so would be (relatively) close to the current exploration areas. The area they are looking to sell is very large, in excess of 100,000 km2 and so would look very good when we were writing up our prospectus. Rebecca has also looked at the scanty information on the area and advises that it is likely to prove very interesting, with a more than 40% likelihood of holding good uranium resources. They vendors would be looking to sell this territory to us for US$1.5m in cash plus a 5% royalty on any production from the area.

Required
Please undertake some research, do any quantitative analysis required and advise on whether paying the US$1.5m is advisable. Please also incorporate your recommendation into the budget.

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