Page 4 - AMANGO MODEL ANSWER 2

P a ge | 4

takeover defense strategy - against VR’s strategic moves. We need to return to our constant growth
policy!

4th Priority: Political Risk Management Strategy

The South African mining charter has now been published. This issue has embedded ethical
dilemmas and there are some risks of expropriation, or at least deprivation of some of our
shareholders of their ownership and rights. This is our 4th priority because South Africa contributes
the highest to group earnings, at 25%, and seems to hold the ‘crown jewell’ (diamonds) that the VR

takeover risk is about; but our strategic direction in priority 2 can inform whether and how we
respond in South Africa. We need to collaborate with other mining companies and challenge the charter
in a South African court of law!

th
5 Priority: Sustainability and Climate Change
The recent coming into force of a new climate change legislation means we need to cut our CO2
emissions by as much as 20% whilst providing more power to operate our mines. This issue is the
last priority because we have 5 years during which to meet this target We must delay upgrading the

power stations for now!

Some of the above issues are embedded with ethical dilemmas (see section B6). Any other issues
were considered neither significant nor worthy of the Board’s attention!

A3. CONCLUSION

Let’s re-iterate and summarise the key actions the Board must now take:

1. Reject the VR offer immediately and activate a takeover defense strategy. The synergies are
not worth the premium; it’s a share-for-share deal and bad for our reputation!
2. Suspend the restructuring programme. Our s-score analysis confirms we are likely to be
restored to investment grade, but proceed cautiously!

3. Collaborate with chamber of mines to challenge the mining charter in court. It violates key
constitutional principles, especially the right to property.
4. Let’s return to dividend growth policy. It could boost our long-term value by as much as 34%

and lower the corporate takeover risk from VR.
5. Delay upgrade of our power stations. It requires US$6billion and our balance sheet still
needs to be fully repaired before we can raise further debt or equity!
6. Conduct a full investigation into our black empowerment policies and practices and take
steps to repair our image with the South African government!

We trust you will find this report helpful.

Developed by The CharterQuest Institute for 'The CFO Business Case Study Competition 2017'
www.charterquest.co.za | Email: thecfo@charterquest.co.za