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A market analysis explores the dynamics and attractiveness of a specific market in a specific industry. It is said to be the portion of the industry analysis and thus in turn of the global analysis of the environment. Through this analysis, the available opportunities, weaknesses, strengths, and threats of a business can be recognized. Finally, with the help of these details, the appropriate strategy of business will be determined. The market analysis is also called as the accepted market investigation that is utilized to notify the planning activities of a business, specifically related to the decisions of purchase, facility expansion, inventory, promotional activities, workforce expansion or contraction, purchase of capital equipment, etc. (Gelos, Sahay & Sandleris, 2011). The intent of this study is to produce a business report for Kingsrose Mining Limited in order to identify some of the vital aspects of the company which is involved in the production, exploration, and development of gold and silver deposits. To do so, the report is explaining the impact of micro and macro factors on the performance of the company. Along with this, the paper is highlighting the sustainable practices that the company has adopted in order to know its contribution to the development of the society and environment.
Kingsrose Mining Limited is based in Australia and engaged in the production, examination, and development of its silver and gold deposits at the project of Way Linggo in the region of South Sumatra, Indonesia. The company majorly operates in the segment of gold and silver extraction. It produces silver as well as gold dore under its project of Way Lingoo in Indonesia that is locally refined in Indonesia for the production of the silver and gold granules (Reuters, 2019). The Way Lingoo project of the company is placed on the mineralized Trans-Sumatran fault the part of the Pacific Rim of Fire. The business is involved in the production from its second mine over the project area, Talang Santo. The Talang Santo is established in the bunch of epithermal veining and is located around 17 kilometers from the processing plant of Way Linggo (Market Screener, 2019). The mine of Talang Santo is comprised of the Splay vein, Mawi vein, and Hanging Wall vein. Kingsrose Mining Limited concentrates on the areas, comprising Way Handa, Petai Kayu, Talang Cluster, Mitra Jaya, Talang Tebat, Rowo Rejo, and Sindang Jaya in the project of Way Linggo. The customers of the company are the insiders, shareholders, and government organizations. Further, the company deals with competition from number of businesses who are giving close competition like International Tower Hill Mines (Canada), Beadell Resources (Australia), Aurion Resources (Canada), Tanzanian Royalty Exploration (Canada), Probe Metals (Canada), Vango Mining (Australia), Bardoc Gold (Australia), Rupert Resources (Canada), White Gold (Canada), etc. (Market Beat, 2019). All the close competitors of the company are mainly located in Canada and Australia and operate their business at different locations for the extraction of gold and silver.
The market share of the Kingsrose Mining Limited in the gold and silver mining industry is 6.67% which has been gained by the company through its huge efforts to grab different projects like Way Linggo (24hGold, 2019). Besides this, the market share covered by its competitors like Orezone Gold Corporation is 12.50%, Aurion Resources Ltd. is 3.33%, and International Tower Hill Mines is 0.52% (Yahoo Finance, 2019).
Perfect competition is said to be a type of market structure where there is an increased number of sellers as well as buyers who are involved in the buying and selling of similar products at a similar price in the market. Besides this, perfect competition is also called pure competition, which exists in the market when there is no direct rivalry between the competitors and all are involved in vending similar products at the same price (Thampapillai, 2010). The Kingsrose Mining Limited operates under the market structure of perfect competition under which there is an increased number of businesses involved in the mining of gold and silver at their specific places and there is an increased of buyers who purchase the products extracted by the company.
Factors of production are considered to be resources that are used by people for producing services and products; they are said to be the building blocks of the economy. Economists have divided the factors of production into four classes that are entrepreneurship, capital, land, and labor (Rasmussen, 2010).
Entrepreneurship – This factor of production is generally considered to be the secret sauce that involves all the production factors in a product or service for the customer. Mr. John Christopher Morris is the managing director of Kingsrose Mining Limited who manages the company and takes its important decisions.
Capital – Capital is related to the purchase of products that are produced with money in the production. This is one of the important factors of production for Kingsrose as it allows it to purchase the required resources and assets for operating the business.
Land – Land can take a broader form as it can be seen in different forms like agricultural land or commercial real estate. Land is the important factor for Kingsrose Mining Limited as it is involved in the exploration of gold and silver.
Labor – It is considered to be the effort that is exerted by a person to produce service or product and bring it to the market. The employees of the company are the key resource as they exert their efforts to extract gold and silver.
Fixed Cost is the cost in which there is no fluctuations with the change in the amount of service of good manufacturer or sold. Under this, the land and machinery used by the company for the exploration of gold and silver is considered to be the fixed factor.
Variable cost is also considered as the corporate expense that alters in relation to the output in the production procedure. Here, labor, raw material, fuel, and capital are variable factors (Raghavan, Vaithianathan & Murali, 2014). The land is considered to be a fixed factor because the area that is declared to be mined by the company will remain fix. But, the labor that is hired for the mining operations varies depending on the size of the land and their skill set.
The cost structure of the company is variable hence the optimal size of the company is medium. At this point, the company is involved in the exploration and development of gold and silver at medium level and with time planning to increase its scope. The company’s cost structure is comprised of fixed as well as variable cost however the variable cost of the business is higher because company is increasing its production.
Mining in the Australian region is considered to be the major part and the main contributor to the economy of the country by offering export income, employment, and royalty payments. In history, mining booms have inspired the growth of the population through immigration to the country, specifically the gold rushes of the 1850s (The Conversation, 2015). A number of minerals, gems, and ores have been mined in history and a range of minerals are still being mined all over the country. Australia enjoys political stability which offers a stable situation for operations and growth opportunities to businesses like Kingsrose Mining Limited. However, this company operates its business in different countries due to which it gets exposed to diverse kinds of political environment as well as system risk.
The economics factors like savings rate, economic cycle, inflation rate, foreign exchange rate, and interest rate define the aggregate investment as well as aggregate demand in an economy. The current issue that has gained the interest and raised debate in the sector of resources was the announcement related to the imposition of the RSPT that is Resources Super Profits Tax in the budget of 2010 on the industry of minerals. Soon after the leadership change of ALP, it was proclaimed that the proposal of RSPT will be substituted with a planned Minerals Resource Rent tax. In contradiction to the RSPT, this will be imposed only on the mined coal and iron ore in place of all the minerals. The main coal and iron ore producers like Xstrata, Rio Tinto, and BHP Billiton specified to the Gillard Government about the newly announced tax that it was less likely to decrease the mining investment in the future. But, smaller businesses of mining have reflected major hostility to the MRRT proposal (Parliament of Australia, 2019).
In addition to this, the Australian economy is an extremely industrialized market economy. The GDP of the country was estimated at around A$1.69 in 2017. The economic freedom score of Australia is 80.9, which makes it the 5th freest economy in the index of 2019 (The Guardian, 2019). The overall score of the country is unchanged from the year 2018, with higher scores gained for government integrity, trade freedom, and labor freedom offsetting a decline in legal efficiency. The economy of Australia has gone through structural change because the investment in the mining boom unwinds in 2012 (Towers, 2017). The country’s government is under the support of this change by making reductions in the corporate tax, reforms in the labor market, and negotiation of additional free-trade agreements. In all, the free-market democracy of Australia has gained benefits from the operative government system that enables exciting entrepreneurial development. Every industry gets exposed to foreign competition and competency employees available, the country remains to be a dynamic and attractive investment destination (The Heritage Foundation, 2019).
The output of iron ore in Australia is declining in the last two decades, due to the Chinese slowdown which is threatening the economic expansion of the nation. The second-largest iron ore producer of the country that is BHP declared that its output decreased to 2% for the entire year, which is the first decline since 2002 (Sumoto, 2019). Besides this, the largest domestic producer that is Rio Tinto reported a decline in the annual shipments by 5%, which is the first decline for the company (Sumoto, 2019). The declining performance of the largest organizations in the industry resulted in letting the government estimate the countrywide production retreating from 1% to 890 million tons (Sumoto, 2019). This is marked to be the first output decline for Australia depending on the data going back to fiscal 1999. Rio has highlighted the declining condition of the industry. This economic decline in the industry illustrates that the demand for the products produced by these businesses will also decrease in the nearer future (Koukoulas, 2015). As Kingsrose Mining Limited is considered to the small player in comparison to the players like Rio Tinto and BHP, reflects that the company is going to deal with the economic decline challenge in the market due to which the demand for its products will also increase in the nearer future especially during a recession.
Source [(Sumoto, 2019)]
In fact, the third place player that is Fortescue Metals Group as estimated a huge downturn of around 3% to 165 million tons for the year end (Sumoto, 2019). This decline in the market is resulted in increasing the price of iron ore.
One of the major issues that can be experienced by Kingsrose Mining Limited in the market related to the factors of production is increasing the cost of labor. The increased labor cost can result in increasing the difficulties for the company to operate successfully in the market. As the increased cost can lead to limited recruitment of the skilled workforce as it can increase the operational cost of the business, which can make its survival tough in the mining industry because there are some of the top players who are searching ways to grab the market share covered by small players like Kingsrose Mining Limited. Hence, in order to overcome this issue, the company must focus on retaining its skilled and experienced employees by offering them better perks, allowances, and salaries. By doing this, the recruitment and selection cost of the business will also be reduced.
The Group exerts efforts to ensure the suitable level of care of the environment is attained in the Project area and is focused on conducting every operation in a sustainable manner. This approach is adopted to overcome the negative impact of the operations of the company over the community and environment. To date, the company has ensured a minimum impact on the environment of its operations majorly because of the non-mechanised, slightly invasive mining techniques adopted by the business (Kingsrose Mining Limited, 2018c).
The company operates its activities depending on the responsibilities signed under the Contract of Work and predominant rules about environmental matters. The assessment of the Environmental impact is executed and complete reintegration and reforestation are done on the compensation land bought by PTNM and given to the Forest Ministry. Some of the activated adopted by the company under the monitoring and management plan comprise:
Kingsrose Mining Limited and PTNM are focused on managing the top work-related health and safety principles at its Way Linggo Project for its contractors, local community, and employees. PTNM hires devoted officers for the Health & Safety and Environment who are assigned the responsibility to creating a safe and accountable environment of working, recognizing and overcoming any of the possible risks of health and safety and safeguarding passable training related to health and safety is offered to every worker (Kingsrose Mining Limited, 2018b). Some of the programs related to health and safety training adopted by the company are discussed below:
In all the activities performed by Kingsrose Mining Limited in the Sumatra, it recognizes the requirement to be socially responsible. The entire Group is focused on creating a permanent, equally satisfying relationship with the nearby societies and executing edges and assemblies that inspire the society to be independent that will enable the society to develop and flourish beyond the Project’s lifetime (Kingsrose Mining Limited, 2018a).
The president commissioner of PTNM, Pak Herryansjah, has detailed understanding related to the nearby community and directly supervises the simplification of its community initiatives. The approach that is accepted is of consultation and collaboration to safeguard its objectives is linked to the community needs. This approach is considered to be very advantageous, leading to several environmental and social initiatives, comprising support for cultural and sporting events, forestry rehabilitation, micro-loans provision, educational scholarships, and medical donations focused at guiding local entrepreneurs to establish their own business operations. More additional assistance is offered for the project of local infrastructure comprising the progress of roads, water drainage, construction of bridges, and helping in the creation of the micro-hydroelectric systems for the generation of power (Kingsrose Mining Limited, 2015).
The biggest advantage offered to the local community is the opportunity of employment at its Way Linggo Project and the widespread programs of training are provided by the skilled employees. A huge group of the workforce comes from the neighboring villages and the winder Lampung province. This company is committed to hiring the bulk of on-site employees from the local community.
As per the statement of Tom Melbye, there is a huge push in the industry of mining to identify more solutions related to sustainability, specifically in relation to the methods or equipment. If the top management of the company is strict and focuses on sustainability, it is very easy to transfer the message to the operator level and confirm that everyone knows what is needed and why it is essential? Additionally, operating closely with the workforce at every level, management should learn to collaborate with the respective governments (Gankhuyag & Gregoire, 2018). By doing so, the mine operator may see a decline in the costly disputes with the domestic municipalities and groups.
In addition to this, the selection of the equipment also performs a key part in sustainable practices. The right selection of the equipment results in reducing CO2 reduction, which helps in saving the environment (Carvalho, 2017).
Furthermore, sustainable practices also provide financial gains benefits. By adopting the green policies Kingsrose Mining Limited can gain a competitive advantage by gaining the capability to recycle and decrease the waste results in the improved bottom line. The industry of mining has started taking sustainability very seriously and has realized that they will not follow this their survival can become tough in the market. In fact, sustainability is related to productivity, which is again related to the economics and profitability. Hence, there are perfect financial gains that can be gained by Kingsrose Mining Limited through sustainability in the future (Mining Technology, 2019).
The above report has provided a detailed analysis of the Kingsrose Mining Limited Company and the market in which it operates. The analysis has highlighted that the company is established in the Australian region and involved in the production, examination, and development of its silver and gold deposits at the project of Way Linggo in the region of South Sumatra, Indonesia. The company operates its business in the perfect competition market structure where there is a number of buyers and sellers in the market. The close competitor of the company is International Tower Hill Mines (Canada), Beadell Resources (Australia), Aurion Resources (Canada), Tanzanian Royalty Exploration (Canada), Probe Metals (Canada), etc. The report has discussed the fixed and variables factors of production in the industry of Kingsrose Mining Limited. The analysis has highlighted that land is a fixed factor whereas labor and capital are variable factors. Besides this, the political scenario of Australia is stable and offers huge opportunities to the businesses operating in the country and outside it. The analysis has highlighted that the mining industry is the major contributor to the economy of Australia by offering export income, employment, and royalty payments. Similarly, the Australian economy is an extremely industrialized market economy. The GDP of the country was estimated at around A$1.69 in 2017. In spite of economic stability, the output of iron ore in Australia is declining in the last two decades, due to the Chinese slowdown which is threatening the economic expansion of the nation. The three main players of the mining industry are also being impacted due to this like Rio Tinto, BHP, and Fortescue Metals Group. Moreover, the report has also discussed the issues that a company can experience in the future due to the factor of production. The analysis reported that increasing labor costs is one of the major factors that can impact the performance of the company as it can increase the operation cost of the business. In order to overcome this, the report has suggested the company focus on retaining its skilled and experienced workforce to reduce the recruitment and training cost.
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