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B. DETAILED REPORT

4. Detailed findings and recommendations

4.1 1st Priority: Operational risk and industrial action in Australia

A faulty design in one of our coal mineshafts in Australia has led to a hurriedly-executed controlled

shutdown with 80 persons trapped underneath initially but now rescued. Every death is one too
many but the reported 6 cases means we are now 1 shy away from exceeding our worse
performance in ‘work related fatalities’ in the last 2 years (page 14 –case study). Whilst the
controlled shut down is unresolved, we are losing US$ 250,000 daily and experts warn of a total
collapse of the mineshaft if we resume operation, worsening our already battered reputation for

safety around the world. Our very existence is dependent on securing the license to operate which
depends on our safety record. To make matters worse, we are faced with potentially fraudulent
safety statistics (see section 5 –ethics), as well as the choice of whether or not to resume

operations, sink a new mineshaft or short down the current one permanently. There is also the need
to urgently reach a decision on the 7-day notice to strike and how to bring finality to an ongoing
protected strike that is threatening to engulf the group.

4.1.1 Mineshaft decision
Restart production: The CEO’s instruction is that we should resume operations immediately and
inform investors that it was a minor problem now resolved. Apart from the ethical implications (see

section 5 of this report), experts have warned this could deal a fatal blow to safety, so we rule out
this option.

Close down and sink a new mineshaft: Appendix 3 shows the NPV is positive at US$ 4 million if we
exclude the costs of closing the current one and it is –US$ 1 million if we include it. Waiting time is a
year and with that, a full year’s loss of earnings. Raising the US$130 million may become an issue at

a time we need every cash we can get to pay down debt. Effectively, the cost is the same amount
we would have paid the contractors as capital expenditure to sink the initial shaft and this further
payment significantly eats into the NPV of this project which would have been at least US$ 135
million.

Close down the shaft permanently: This will save the need to commit a further US$135 million but it
will mean foregoing 9 years’ worth of earnings or we will be forced to ramp up coal production

elsewhere or buy in the open market to honour our 2017 coal futures contracts.

4.1.2 7-day notice to strike
Developed by The CharterQuest Institute for 'The CFO Business Case Study Competition 2017'
www.charterquest.co.za | Email: thecfo@charterquest.co.za