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score of 108 to 106 million GJ (2) Contingent costs such as future compliance or land reclamation
costs are often ignored –these need to be incorporated in NPV calculations as we have done in
Appendix 3; and (3) Relationship costs e.g. the cost of producing environmental information for

public reporting are often ignored -for instance the PR costs to manage communications to the local
community to reassure them about safety and environmental issues –such the mineshaft issue in
Australia (section 4.1.4 of this report). Management could look at modern management accounting
techniques such as Life cycle costing –these record the costs of a product ‘from cradle to grave’,

taking into account the environmental consequences across the whole life of the product e.g.
costs of handling regulatory difficulties and design choices such as in this Canadian case and

the land reclamation costs. Environmental life cycle or activity based costing could also help.

4.5.4 Recommendation

The board should choose Design 1 and commission a detailed examination of life cycle costing
to assist address its environmental reporting concerns.

Justification: We need to maintain a risk averse stance so maximin and minimax regret are most
appropriate. The resurgence in copper prices may be only temporary and we are already operating
outside the boards’ appetite for commodity price risk. Being the smallest design, it will minimise our

capital expenditure commitments. Even with the given probabilities of different demand levels, we
have assumed prices will remain the same; adding to the risk -should prices collapse again by the
time this long wall is ready in 2 years, our losses will be minimal under Design 1.

Actions:
 The CEO of AMANGO Copper Canada should notify the JV Board that based on our expertise in
mining, we should proceed with Design 1;
 Establish whether a JV agreement is in place and do one if not; and

 Cephas and AMANGO should jointly and equally assign shareholding to local partner -ideally,
with representation from ‘Idle No More.’

5. ETHICAL ISSUES AND RECOMMENDATIONS

5.1 Managing divisional performance group-wide

Cutting back on training can be a legitimate course of action to stay within cost budgets but doing so

to meet bonus targets is self-interest and shows lack of due care and fairness to employees who
depend on training to perform better and also earn their own bonuses or pay increase. Postponing
standard service for safety critical equipment puts the self-interest of the Divisional Managers above
the safety of employees. Ramping up production to build closing stock to show better results
suggests managers are taking advantage of an absorption costing system that declares more profits
Developed by The CharterQuest Institute for 'The CFO Business Case Study Competition 2017'
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