Paper Example on Finance and Strategic Management

Introduction

Pan African Resources PLC is a mining company headquartered in the United Kingdom. It is focusing on the precious mineral ores, specifically gold, and has expanded internationally to many other countries like South Africa, Nigeria, and Germany. Its sources of capital range from the sale of shares to the public, the percentage of its profits set aside for development, loans and savings, venture capital, and debentures. It is a public company hence listed in the securities and stock exchange markets where it shares are transacted through buying and selling to the public. In this regard, it is listed on the London stock exchange, located in the city of London, United Kingdom. In the paper, the focus is made on the corporate governance and challenges of the Pan African Resources PLC as recorded in the London stock exchange company. Also, the capital investments of the company ranging from the existing as well as the projected ones are exposed. Moreover, the sources of finances for the company used in fiscal the year ended 30th June, as is recorded in the London stock exchange are comprehensively expounded. The financial information of the company are used in the calculation of its financial ratios such as the rate of stock turnover, inventory turnover, payables turnover, current ratio, quick ratio, cash ratio, debt to asset ratio, debt to capital ratio, debt to equity ratio, and interest coverage ratio (Marson, J. 2013). Others are the gross profit margin, operating profit margin that are used in the determination of its financial states in so far as liquidity, return on the invested capital, the turnover of the asset, the performance as well as general strengths and weaknesses of the company are concerned. Such tools, ratios, form the basis of fundamental analysis of the performance of the company. As the paper wraps up, the share performance of the company in the London stock exchange is evaluated.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

First, the status of the corporate governance of Pan African Resources PCL is unique for its existence and the way of carrying out its business activities. Also, its challenges are unique depending on both its internal and external business environments and the kind of activities it is engaged in. In this regard, its corporate governance functions in a way as to make the company comply with the United Kingdom Companies Act, The King code of governance of South Africa, titled as King III together with the Requirements specified in the JSE Listings. Also, it strives to bode well with the AIM rules to the best ability of the management because it is a large organization worth possessing a clear set of rules and strategic management that is in line with the set laws and regulation in the country. Its board of directors works to its level best to ensure that the business of this large organization, the Pan African resources PCL is conducted with a high degree of accountability and integrity, professionalism, accuracy, responsibility, and transparency that is called for and required of any corporate governance practice. It is because it will help achieve its objectives of performing to its level best in maximum resource utilization and gaining an impeccable competitive advantage. The board of directors embraces the best practice guidelines and principles based on the mutual understanding that quality, reliable and sound corporate governance practices are the key determinants and fundamental to earning respect and trust of the stakeholders of the company. Such stakeholders include the customers and clients, shareholders, suppliers of materials, fellow interdependent companies, employees, the management and the government. It is critical in promising the success of the group and preserving the value of shareholders. It is only through this way that the progress, sustainability, and survival of the business are assured (Ferran et al. 2014). The board of directors puts into consideration the fact that the existing nonexecutive directors bring a whole lot of experience to the company, as well as a vast range of skills that are appropriate and relevant to the subsequent stages of the growth of the company. Besides, the existing company board puts into consideration the fact that the records of the company directors; the executive and departmental directors; on the management of the public company demonstrate the capability to make sure that the interests of the constituent stakeholders are dully taken care of responsibly. The board also puts into consideration the guidance and directions that are published by the Institute of Chartered Accountants in the United Kingdom and Wales. They are famously termed as the Turnbull Report. It concerns the requirements for the internal control of the combined code. The company's board of directors will keep on reviewing the entire business risks aside from providing a fully-fledged financial management risks that face the company in its day to day operation of its business activities. In this way, its operations are constantly taken care of and therefore thrive smoothly under the impeccable leadership of an ably quality corporate management.

The board of directors governing and carrying on the corporate governance of the Pan African Resources PCL is keen on the financial wellbeing of the company. It also aims at a good remuneration of its employees whose salaries and wages are well discussed and settled at by a chosen body. Such a body is a committee established by the board is referred to as the Remuneration Committee. It comprises of three members of the nonexecutive directors. Its purpose is to review the work performance of the Executive directors after a specified working period. It does so to monitor their progress in comparison to the previous periods. It is also aimed at assessing the responsiveness and realism of the management level targets and level of output managed in a particular set time frame, as per their promises. The committee is also tasked with determining the remuneration of the directors as well as the basis of their agreements to service about the best interest of the concerned shareholders. It, moreover, determines the levels and the conditions under which any bonuses proposed are paid to the executive directors as well as the grants to the employees and the directors in the submission of the share option scheme of the company. On the other hand, the chairman of remuneration committee is not subject to independence as JSE specifies. Hopefully, the board of directors is in satisfaction that the interests of the Executive directors together with the employees are fully met.

Additionally, there is an audit committee established by the board of directors. It has the responsibility of ensuring that the financial position, performance, and the turnover of the company are dully monitored, regulated and timely reported on. It also regularly meets the auditors and reviews their so far reports on the financial position, internal controls, accounts and wellbeing of the company.

The Pan African Resources PCL also faces some challenges in its day to day operations in gold mining and business. One of them is the increased strength of the rand currency against the dollar. It makes the gold sold by the company, which constitutes its main source of income, to get devalued n some degree hence making the income less than the amount incurred in the investment process. It is because the gold products are then sold at process lower than the ones deemed profitable for the company. Such a condition would reduce the net company readings from its activities, hence a challenge deterring its smooth progress. Another challenge encountered by the company is a fall in its price of shares on the London Stock Exchange where it is listed. It is a vastly deteriorative set back since the sale of shares to the public is the company's major source of capital used in funding most of its projects. In this regard, the lowered price of the shares dictates the reduced operational costs of the company (Nathan et al. 2016). It will therefore not be able to fund most of its activities as well as expansion. It thus acts as a setback to its smooth ward trend.

Moreover, there are instances where the underground shafts in its gold mining areas collapse. It is a major setback due to the high costs associated with the repair of shafts, dealing a huge blow to the financial well-being of the company. It leads to the reduction of the funds which could have been used in other developmental activities as well as salary increment to the staff. It thus leads to dissatisfaction which sparks the sporadic industrial actions by some of its staff especially those working in the mines (Roach, L. 2016). It is another huge challenge to its progress given the set working timetable and the resources set for such a purpose, which go to waste during such a dispute, posing a challenge to the Pan African Resources PCL.

Moreover, due to the high value attached to gold, the labor expenses are also too high. It is a situation that once coupled with lowered sales and prices of gold yields some losses to the company. There are also high charges of electricity consumed in the gold mining premises which increases the disposable expenses of the company. It thus reduces the profitability margin of the company hence a challenge.

There is also a challenge facing the company in so far as the processing of its minerals is concerned. It is caused by the unreasonably high costs of processing gold. In this regard, most of the number of returns that could have increased to raise the profit margins of the company are absorbed and find their way out through the payment of the unit gold processing costs. It is, therefore, a challenge to the growth and development of the South Africa based Pan African Resources Company.

The Pan African Resources PCL has enormous capital investments, both the present and the projected ones. Currently, the company has invested its capital in Evander gold mine in Evander, South Africa, which is its leading gold producing plant, rated as producing a region of 95,000 oz of gold yearly. There is also its gold mining site in Barberton in Mpumalanga province, which consists of three gold mines; the Fairview, Sheba, and Consort. An R1.7 billion retreatment project at the Evander gold mining site is also present. It is an expansion that is projected to steadily reach a sustainable state of gold production by 2018, September. It is, specifically, expected to yield the company 100,000 oz of gold each year. Also, Pan African Resources in holding some negotiation talks in its bid to widen the scope of its capital investment. It is aiming at expanding its operations to Mozambique by acquiring some of the assets of ASA Resources Company. It is thus an expansion regarded as an impending future investment. For other future investment plans of the Pan African Resources, there is a reassessment of Evander Mine's Egoli Project which is progress and is expected to begin the way forward on how to carry along the project which is also expected to yield good profitability to the company. Additionally, there is a capital investment that is focused on Barberton project with the expected return of 50,000oz of gold by the end of second half of the tear 2018, which is estimated to have increased by 23$ from the quantity reaped in the first half of 2018 (Shadova et al.2016). There are also projected plans to install the regrind mills in Barberton Tailings retreatment Plant aside from the construction of the Elikhulu Tailings Retreatment Plant where it is expected to produce its first gold output as the year 2018 approaches the end.

Furthermore, there are various sources of finances to that Pan African Resources use in funding its activities, especially the ones used in the financial year that is projected...