=RIE'F CASES

9 -9 13 -5 4 a

WILHAM E. FRUHAN

WEI WANG

New Eart h Mirring, Inc.

Com p a n y B ac k g ro und
fro m5300 pe r
I t wa s the Wnni ng 2 013. Aft e r g ° l d price s e xp e ri e n c e a
of dn u n p re c e d e n t eboomd
t o 51,700 i n the
ounce de ca de , De nve r-ba s e d N e w E a rt h Min in go n e o f the
ounce pe r pre vious
wa s e njoying ra pid growth i n e a rnings . Wi t h the c o nti nued
la rge s t U.S . p re c i o u s -m e t a produce
l rs ,
N e w Ea rth ha d a ccum ula te d a la rge a m o u n to f ca s h o n its
o f its ma rgins ,
improve me nt ope ra ting
ba la nce s he e t (Exhibit 1) ha d a It s i mpl ede bt s trucmre a nd a re a s ona ble le ve ra ge ra t i o wi t h no

s ignifrca nt ris k of liquidity,

Mos t of the com pa ny's m ine s we re loca te d i n the U.S . a n d Ca na da , b u t like m a n y othe r firm s i n
-. =' 3 pre cious -me ta ls indus try, Ne w Ea rth h a d ma de s ubs t m i a l inve s tm e nts i n gold e xplora tion
i n othe r countrie s s uch a s Aus tra lia a n d C h i l e .H o we ve r, l i ke m a n y. Indus try p a rt i c i p a n t s ,
p ro j m
Wi t h its
N e w Ea rth e xe cutive s wo rri e da b o u tthe s u s t a i n a b i l iotf y gold pnce s a t the ir curre nt le ve ls
c o nd i ti o ann d the de s ire t o dive rs ify its bus ine s s ne w ca pita l inve s me nts
s trong fM n c i a ] through

ra the r t h a na cquis ition, N e w E a rt hfe lt it

wa s ne ce s mry t o imple me nt a d i ve rs i fi c a t i o progra
n m
tha t
the pos s ibility
wo ul dre duce its d e p e n d e n coe n pre cious me ta ls , T h e c o m p a n ys ta rte d inve s tiga ting
o f dive rs ifica tion inbase me ta ls a nd o t h e rm h e ra l s .

N ew In ve sm e n t op p or tu n ity i n S o u t h Afri c a

A ne w inve s tme nt opportunity a ppe a re d i n e a rly 2 012 N e w E a rt h wa s i nfo rmedo f the e xis te nce
of a ma jor body o f i ro n ore clos e to the ma s s ive Ka la ha ri ma nga ne s e fi e l d i n the N o rthernCa pe o f
S outh Afri c aby a n i n d e p e n d e ne txplora tion cons ulting c o m p a n y.N e w E a rt h fe l t a n inve s me nt in
i ro nore provide d a s tra te gic fi t fo r its d i ve rs i fi c a t i oobje
n ctive .

S ince s te e l re pre s e nte d a lmos t 95% of the me ta l tha t wa s us e d i n the wo rl d , i ro nore wa s a rgua bly
m ore inhe gra l to
the globa l e conom y t h a na n y o t h e rm ine ra l.T h e price o f i ro na p p re c i a t e d
m ore tha n

fi ve fo l d fro m2 002 to 2 012 (see Exh ib it2). U nl i k ethe price o f B o l dfo

, rwh i c h the re wa s cons ide ra ble

HIS rhJe u« r wm i* m E, F mn m ma s or Wd Wm mtm Unlvr n i v, K i np mm i a n wnd lhi* me m l y H 1 lw, * k cw

Coprri*\l C a n ] P t «idtm m
w\» ltm· * td B M n n rPublithw
m.I
mm
d H m ·rl C o m -T o
MA 163, o r go
M m
coph or wml p« m uum
h l t p //ww hbs pm 'udruu.
Io rrfmdu
m publica tion my
crlll?
m re ri a b .
m be
m
rt i g i m

mm rt. Mmle te ra onm P t o t m m S hiu'immc* d M p x« e F» z o l arl l m' -nl mul · ol M* n wm m -Ah i n rd rb rd um

.. z oloto O« 2 018.
 913-548 N m E a rt hM i n i n gInc.
t
the p ri c e o f i ro n ore wa s n o t e xpe cte d to fal l dra ma tica lly give n the s trong globa l
s pcmla tion,
de m a nd fo r the commodity. Accordmg t o a 2 012 re port by the U.S . Ge ologica l S u rve y, the wo rl di ro n
ore m a rke t wo ul dc o nti nueto be tight, wi t h d e m a n de xc e e d i n gS upply u n tila t le a s t 2 016. This wa s
due the long le a d time s m ine s i nto production, a wo rl d s h o rt a g eo f s kille d la bor,
to re q u i re dto bring
a nd na tura l re s ource na tiona lis m , w hi c hre duce d e xports fro ms om e na tions . G i ve n t h a t the
growing
price of i ro n ore ha d
a p p re c i a t e ddra ma tica lly a fte r 2 007 a n d wa s e xpe cte d to s ta y a b o ve 580 pe r
m e t ri cton, N e w E a rt h de cide d t o e va lua te the fe a s ibility a nd p r ofita b ility
of de ve loping the Ka la ha ri

m ine .

N e w E a rt h hi red D re xe l Corpora tion, a n e n g m e e ri n ga nd c o ns truc ti ofinrm , t o a na lyz e the e xt e n t

of the de pos it a n d to de te rm ine the cos t a nd fe a s ibility o fe s t a b l i s h i nag m i n e s ite clos e to Ka l a h a ri .
T h e e n g i n e e ri n gfi rm fo und t h a t the fi e l d conta ine d 30 m illion tons of ore wi t h a n a ve ra ge i ro n
c o n t e n ot f 60% . At the proje cte d e xt ra c t i o nra te o f 2 million tons pe r y e a r, it wo ul d ta ke 15 ye a rs t o

d e p l e t ethe ore body.

Dra wing i n pa rl o n its e a rlie r

e va lua tion of a n i ro n ore proje ct in S is he n, S o u t h Afri c a , D re xe l
e s tima te d in o c to b er2 012 t h a t the propos e d ve nmre in S o u t hAfri c a c o ul d b c ope ra tiona l by the
M g wu n g o f 2 015. D re xe l re p o rt e d t h a t the re wa s l i mi ted ne e d fo r i n fra s t ru c h i re inve s me nt to

s upport the de ve lopme nt o f the lm,

a nd the t o t a linve s tme nt cos t wa s e s tim a te d t o be 52 00 m illion
wi t h 4 0% o f the inve s tme nt re q u i re da t the b e wn g o f 2 013 a nd the re s t re q u i re da t the be ginning
o f 2 014. Thi s inve s tme nt a m o u n two ul di nc l ud e c o ns truc ti ocos n ts a n d re la te d i r» u ra n c e ,ope ra tiona ]
cos ts , a nd 52 0 m illioni n working c a p i ta l .O re wo ul d be tTucke d tb Durb an a nd ra ile d t o P o rt
H i z a b e t hi n the Ea s te rn Ca pe fo r e xport. G i ven the high qua ntity o f i ro n conta ine d i n ore m ine s i n
S o u t hAfri c a a n d the e a s y a c c e s tso ports fro m the m ine l o c a t i o nthe , ve nhire wa s e xpe cte d t o ha ve
l o wproduction cos ts .

of th i s
By N o ve m b e r2 012 , N e w E a rt h wa s a ble to produce pro form a a na lys is o n t h c profita bility
ne w inve s tme nt ( Exh ib it3). T h e a na lys is re ve a le d t h a t the i n ve s t m e n top p or tu n ity ha d a ttra ctive

pote ntia l. At a n a s s ume d price o f $ S O pe r ton, t h c inve s tme nt op p or tu n ity p ro m i s e ds trong ca s h

fl o ws .T h e proje ct wo ul d produce e ve n s tronge r ca s h fl o wS g rve n a n optimis tic price fofe ca s t o f i ro n
ore a t 5100 to n, N e w Ea rth a ls o pe rforme d a s e ns idvity a na lys is to a na lyz e the impa ct o f va rious
pe r
dis count ra te s a n d i ro n ore price s o n the ne t pre s e nt va l u e o f the proje ct's ca s h fl o ws (E xh i b i t 4 ).
its in itiaal ttra ctive ne s s , [ h c proje ct ca rrie d s om e s ubs ta ntia l ris ks t h a t N e w E a rt h ne e de d t o
De s pite
cons ide r.

Ma r ke t fo r I ro n or e

Ir onore wa s cons um e d pre domituntly by the s te e l indus try. Chi na,Ja pa n, a nd S o u t hKore a we re
a m ong the to p countrie s i n b o thi ro n ore imports a nd s te e l production ( Exh ib it5). I n 2 010, C h i m
importe d a lmos t 60% o f the wo rl d ' st o t a li ro nore e xports . Ja pa n a nd Kore a we re n e xt amo ngt h c t o p

i m p o rt e rsDuring
. the pre vious d ec i d e,wo rl d s e a borne de a la nd in i ro nore h a d d o ub l eds i r«e 2 000.
Accordmg to B H P Billitono, n e o f the wo rl d ' sla rge s t i ro n ore p ro d u c e rs globa , l s e a borne i ro n ore
t ra d e wa s e xpe cte d to g ro ws te a ddy o ve r the n e xt de ca de , a t a n a nnua liz e d ra te o f 4 .4 % p c r ye a r.

Alm ,a ccording to AM E Mine ra l Econom ics , a n i n d e p e n d e n tre s e a rch hous e o n c om m od itim , e

c rud
s te e l production i n the s e thre e As ia n munlrie s wa s e xpe cte d to g ro w m o re tha n 35% in the n e xt

de ca de .

ot· An
Z
M I E F C AS E S I H AR VAR D B U S I N E S SS C H O O l _

mllm«lor r» a only In m l . S ]cinm h S r*«'1 Adw« a « Corpon* F* wnc* 2 00 ra m n lMUMU M n o d2 011» o da o n

 Ntw l u t h Xlinin& l«. t 9)3-548

to the U.S . Ge ologica l S urve y, a s o f the be ginning o f 2 012 , S outh Afri c a wa s ra nke d
According
14 t h in t h c Wo rl d i n i ro nore re s c ri ' mwi , t h a n e s tima tcd o n e b illion tons o f crude o rc .Additiona lly,
a s the Th i ro n o rc i n the W o rl d (L xh i b i t 5). Hlos t o f the
S o u t hAfri c awa s ra nke d la rge s t p ro d u c e r o f

re s e rve s we re loca lcd i n the N o rm e m Ca pe P ro vi n c ei n the la rge Ka la ha ri ma nga n¢? s e fi e l d ,

country's us e d t o
S a lda nha wa s one o f the p runary ports
clos e to the B o t s wa m a n d Z i n i b a b we borde rs . Ua y
it S outh Afri c a
e xport i ro n o re , wi t h m ore tha n 34 m illion
t o m pa s s ing through e a ch ye a r. Be ca us e

be o n e the t o As ia , s ignifica nt
c o ns truc ti o
c nffo trs ha d be e n p ut
wa s pos itione d to o f m a jor e xporte rs

i nto ne w ports a nd fa c i l i t i efo s r ore e xports

building
i n ve s t m e n t
wo rri eda bout a n u m b e ro f ris k la ctors a s s ocia te d wi t h ma king
a la rge
New Ea rth wa s
wa s a ma jor ongoing conccrn.
in S outh Afri c a . M e politica l s ys te m wa s uns ta ble a nd corruption

it a s onc o f the c o untri

€ i n te rm s o f p ° l i t i c a lris k a ffe ctmg mining
Indus try e xpe rts ra nke d to p S

the re
of c ivilwa r i n ne ighbotmg countrie s wds a c o n s t a nthre
t a t. Furthe rm ore ,
ris k
o p e ra t i o n High
s. a s S o u t hAfn c a tha t the gove rnme nt
s uch
e xis te d the o n g o i n gfe a r wi t h a ll le s s -de ve lope d countrie s

wo ul dna tiona liz e na tura l re s ource ope ra tions .

fo r N e w Ea rth, multiple c o untri mincluding Chi na, Ja pa n, a nd S o u t hKore a we re

Fortuna te ly
the a s s ura nce o f s upply o f ra w ma te ria ls t o the ir dom e s tic s te e l
s upportive of long-te rm
e xtre me ly
wa s vi t a l t o the ir e conom ic growth. Thei r gove mme nLs ha d provide d
a s s te e l production
p ro d u c e rs a n u m b e r oE le s s -de ve lope d countrie s .
va ri o u sform s o f cre dit Io mi mng owa tions i n
gua ra nte e s
il t o r N c w Ea rth o i ml f a ga ins t the s rg n i fl c a n t
The s e gua ra nte e p ro g ra m ma de pos s ible prote ct
¢

ris k e m be dde d in the S outh Afri c a nV e nture .

pollbca l

a
e g o tiating Fi nanc i ng P a c ka g e

s e cure d a fe w la rge s te e l produmrs loca te d in

By De ce mbe r2 0 11 N e w E a rt h h a d te nta tive ly
a s cus tome rs . I ro n ore wo ul dbc s hippe cl t o the s e countrie s vi a
Chi na,J a pa n, S
a ndouth Kore a ma jor
t o purcha s e h a l f o f
s e a borne tra de . T h e two s te e l p ro d u c e rsi n Chi na we re contra chia lly obltga tcd
i n S o u t h Kore a a nd Ja pa n we re contra ctua lly
N e w Ea rth's Ka la ha ri i ro n o m o utp utwh i l e thos e
ti me
oblrgntcd
t o purcha s e thc ohe r h a l f.Thc p u rc h m W ou ldbc s e ttle d a t the ore m a rke t price a t thc
Ne w E a rt h wo ul dfo rm n ne w N
s u b s i d i a ry, c w E a rt h S o u t hAfri c a (NES A), to
o f the ore s hipme nt.

unde rta ke the nuning ope ra tion It ha d te nta trvcly ne gotia te d a M a t xi n g pa cka ge wi t h the pote ntia l

cus tom e rs a nd a s yn d i c a t oef U 5 . H ai mfu r its S outh Afri c a nve nture .

e projccL 5100 m illion

wi t h
of the $2 00 m illion ne e de d t o c o m p l e t the w a s te nta tive ly ne goda te d
the ove rs e a s buye rs . T h e two s te e l ma ke rs i n C h i n a a gre e d t o le nd N E S A 560 m illioni n s e n i o r
s ubordina te d de bt a t 9% inte re s t. This loa n wo ul d be re p a ya b l ea t the ra te o f 5 8 m illion pe r ye a r
be twe e n 2 02 2 a nd 2 02 8, wi t h the fi n a l 54 mmi o npa iLI d o wni n 2 02 9.'The l o anwa s g u a ra n t e e dby the
o f Chm. A c o m p a ra b lmnc e i ng a gre e me nt wa s a rra n wi t h the g ro upo f s m l
Pmple 's Re publ«
m a ke rs i n S outh Kore a a n d Ja pa n To i nd um N E S A t o s e ll ha lf o f the i ro n ore output t o the
ba s e d i n the s e two muntrie s , a la rge Ja pa n € s e ba nk a nd Exp o rt-I mp o rtB a n k o f S o u t h
compa nie s
Kore a a gre e d m foindy M O m illion de bt a t a n inte Je s t ra te o f 7% . This l o an
·
s e nior uts e cure d
provide
ww pa ya ble be twe e n 2 m6 a nd 2 02 6 a t a d e le r a tin gra te (m i b i t 6), nd wa s g u a ra n t e e db y the
c entnlba nks in the s e two m untrie s ,

Ne w E a rt hI umed m dom e s tic le nde rs t o o b t a i nthe remai ni ngfina ncing ne ce s s a ry fo r the S o u t h

Afri m n i n ve s l m e n LA g ro upo f U 5 . B a m te nta tive ly a gre e d t o provide a S yndrca te d ba nk l o a n
wo rth mm lltionre pa ya ble be twe m 2 016 a nd 2 02 3 t o N E S A. s e nior m b a n k l o a nwo ul d c a rry a

H AR VAR DBUS INES S S C H O O LI B R I E F C AS E S 3

911548 Nm m Minin& Inc.

10% inte re s t ra te a nd be colla te ra liz e d by the mining e quipme nt, wh i c h wo ul d be p u rc h a s e dfro m I

la rge U.S . m a nufa cture r. An e xp o rt fa cilita ting a rm o f the U.S . gove rnme nt a gre e d to gua ra nte e this

l o an ln t o t a l ,54 0 m illionwo rth o f loa ns to be we re

provide d a t the be ginning of 2 013 a nd 512 0
m illion wo rth o f loa ns we re t o be provide d a t the be ginning o f 2 014 . Re pa yme nts we re to be ma de

s ta rting a t the e nd o f 2 016 (Exhibit 6 ). In ad d i ti o n,no inte re s t wa s to be pa id i n 2 013 a nd 2 014 . T h e

inte re s ts a ccrue d i n thos e ye a rs wo ul dbe p a ya b l ea t the e nd o f 2 015 wi t h no inte re s ts compounding.

Va rious loa n cove na nts we re e m be dde d i n the fina ncing pa cka ge . Aft e r de ducting inte re s t a nd
contra ctua l d e b t re pa yme nts , N E S A wo ul d us e a l l re ma ining d i s c re t i o n a ryca s h fl o w fo r
pre pa yme nts oF de bt a nd the is s ua nce o f d i vi d e n d s M
. e a m o u n tpa id o u t i n d i vi d end wa s s n o t to
e xce e d the a m o u n ta lloca te d to pre pa yme nt o f de bL B o ths e nior s e cure d a nd uns e cure d de bt wa s to

be pa id in ful l be fore
junior de bt, a ccording to the de bt
pre pa yme nt s che dule . T h e a cm a l a mount of
p re p a ym e n tot e a ch cla s s o f s e nior de bt wa s proportiona l to the origina l principa l a m o u n t .Fina lly, no
d i vi d endcould
s be pa id t o Ne w E a rt h u n tilDe ce mbe r 31,2 016.

To c o m p l e t ethe i n ve s m e n t , N e w E a rt h wo ul d i n ve s t t h c 54 0 m illionin N E S A a s
re ma ining
e q u i v ca pita l, a t the be ginning o f 2 013 (Exhibit 7) T h e N ati o ml As s ura nce Corp, a n ins ura nce
com pa ny ba cke d by the U.S . gove rnm e nt, g u a ra n t e e dN e w Ea rth's i n ve s t m e n tin S o u t h Afri c a
a ga ins t pote ntia l lo sses due to c i vi l wa r a n d
g o ve rn m e n t na tura l re s ource
na tiona liz ing assets. To
Ne w a de a l wi t h a l l its fina ncing
pa rtie s . I t wa s a gre e d
furthe r prote ct its inve s tm e nt, Ea rth s truck

up o nwi t h e a ch p a rt y o f the propos e d 5160 m illion de bt fina ncing t h a t i n the e ve nt o f a cos t o ve rm n

the a m n l l n to f ca pita l s upplie d wo ul d a utoma tica lly incre a s e by u p to 7% o n a pro ra ta ba s is fo r a u
}e nde rs . He nce , the proje ct wo ul d be gua ra nte e d fo r $2 4 0 m illioni n ve s m e n t be fore N e w E a rt h
wo ul d ha ve to re s ort to ad d i ti o nal funding, The mining ope ra tion wo ul d be ca rrie d o u t s ole ly by
N & A, the ne w s u b s i d i a ry,whi c hwo ul d furthe r p ro tmtNe w E a rt h a ga ins t pote ntia l lia bilitie s . New
Ea rth wo ul dn o tha ve to gua ra nte e nor be fo rN E S A' s de bt obliga tions .
re s pons ible

P ro j e c t Va l u a t i o n

me te nta tive fina ncing pa cka ge a rra n g e dby Ne w E a rt h ha d

the pote ntia l to tum a n othe rwis e
u n a t t ra c t i ve
proje ct into a p ro fi t a b l einve s tm e nt opporMnity. the c o m p l e xfina ncing
Howe ve r, pla m
cre a te d s ome cha lle nge s fo rN e w E a rt h i n e va l u a t i n gt h c inve s tm e nt wo rtho f the ne w proje ct. Fo ur
d iffe rcnt val uati o na pproa che s we re propos e d. Ea ch val uati o na pproa ch ha d a d i ffe re n t
cha mpion
The s e i nc l ud ed the vi c e pre s ide nt o f ope ra tions , thc a c c o u n t i noffi a n outs ide
gce r, cons ulting firm,
a nd a fi m m i a l
a na lys t wi thi n the fi rm . T h e C F O o f N e w E a rt h wa s cons ide ring a l l a va ila ble
a pproa che s t o de te rm ine he corre Lt val uati o n o f the ir S o u t hAfri c a n ve n t u re .

Ap p rm c h 1-VP o folx ra tions

The W of s lle d fo r dis counting

o p e ra t i o nca the prote cte d ca s h n o ws to be g e n e ra t e da t N E S A
by
New Ea rth's 14% a ve ra ge cos t o f ca pita l, wh kh is obta ine d
we ighte d m the we ighte d a ve ra ge o f the
(os t o f e quity (15% ) a n d the cos t o f de bt (10% ) wi t h le ve ra ge a s s ume d to be a t 12 % o f the
s t ru c t u re All
. s pe cifics o n fimncing of WA
we re imore d. G i vm the proje cte d price of
ca prta l
ino n ore
a t 580 pe r l o n he s ugge s te d tha t ttw ne t pre s e nt va l u e o f the i n ve s t m e n t
proje ct wa s 583 m illion
(Exhibi! 4)

Approa ctt 2 -Am u n ttn g ouice r

The a ccounting o ffi c e rit N e w E a rt h s ug8mte d tha t the ne w i n ve s m e n t I n S o u t h

Afri c a ca rrie d
l y r ris ks t l wn the typica l
s u b s t a n t i a l highe i n ve s t m n t s tha t ha d be e n m a d e by the h th¢ compa ny

BMEFCMEs H AR VAR D BUS INES s

I
 N m b rl h Minin& lm. 19t3-54 8

pa s t. H e a ls o a rgue d t h a t s ince
N e w Ea rth's ha d be e n gold a nd
ma jor ope ra tion e xplora tion
production i t wo ul d be to us e the cos t o f ca pita l fo r Lhe ne w ve nture . Ba s e d
ina ppropria te con7pa ny's
o n s i mi l arinve s tm e nts tha t we re ma de by pe e r compa nie s i n i ro nore de ve lopme nt i n de ve loping
countrie s the a ccounting o ffi c e r propos e d t o dis count thc proje cte d fa s h nows a t 2 4 % , a] 0 %

p remi uma bove N c w Ea rth's cos t o f c a p i t a l The o f the we re rgnore d,

. s pe cifics fina ncing pa cka ge
G i ven the ne w d i s c o unt ra te t h c proje ct wo ul dha ve a ne t pre s e nt va lue o f-5 2 8m illion ( Exh ib it 4)

Approa ch 3 -Exte r n a l Cons ulting F t ri n

N e w E a rt h hi red a n a n i n d e p e n d e npe o n the

outs ide c o ns ul hngfi rm t o provide t rs pe ctive
o f the ne w inve s tm e nt. The fi rm tha t the N E S A i n ve s t m e nwa t s a
profita bility cons ulting s ugge s te d
a nd p ro p e rt i e s . O n the o n e
s ta nd-a lone proje ct fo r the c o m p a n ywi t h uni q ueopportunitie s le ve ra ge

hand ,the re q u i re dra te o f re turn o n t h c com pa ny's e quity i n ve s t m e nitn NEA wo ul d be highe r t h a n
ris ks . O n the
the com p a n ys own 14% cos t o f ca pita l be ca us e the ne w i n ve s t m e nca t rrie d cons ide ra ble
ta ke n N e w Ea rth fo r the ne w ve nhire could re s ult i n l o we r
othe r ha nd, the s ubs ta ntia l le ve ra ge by
the cos t o f ca pita l fo r N E S A
cos t o f ca pita l fo r the s u b s i d i a ryt h a n the pa re nt c o m p a n y.The re fore ,
a t this ra te .
e s tima te d a n d a ll ca s h n o ws fro m the proje ct wo ul d be
dis counte d
s ho ul dbe prope rly
the ris ks a nd s ubs ta ntia l le ve ra ge a s s ocia te d
T h e cos t o f N E S A' s e quity wa s a s s ume d t o bc 2 4% give n
wi t h the proje ct.

Ap p rm c h 4 -I n t c m n l Ana lys t

A fina ncia l a t N e w E a rt h s ugge s te d t h a i the c o m p a n ycom pa re the dis counte d

a na lys t working
holde rs a t N E S A' s cos t o f e quity (2 4% ) t o the e quity
inve s te d by N e w Earth,
ca s h flows For e quity
b ehi nd this wa s tha t N e w Ea rth's
k no wn a s the Flows t o Equity a p p ro a c h . T h e ra tiona le a p p ro a c h
be pa id t o
rp l e va n ti n ve s t m e nwa t s 54 0 m illion a n d the ca s h nows cons is te d o f only the d i vi d end tso
tl, : m the thre a t o f los mg m ore t h a n its
1?duity holde rs . N e w E a rt h wo ul d be c o mp l e te l y ins ula te d
fu ll the ca s h Rows to
o n this a p p ro a c h , a o f p ro j e c t e d
e q u i t y inve s te d i n N E S A. Ba s e d pa rtitioning
to
a n d h o l d e rs ha d t o be e s tima te d. The a na lys t cre a te d the ca s h R o wpa rtition
de bt holde rs e quity
a s we l l a s the s che dule of de bt a m ortiz a tion wi t h de bt
d i ffe re n tprovide rs o f ca pita l (Exhibit 7)
d u e t o the
( Exh ib it8). His a na lys is i nc l ud eda fa s te r re t i re m e n t
of de bt principa l
pre pa yme nt
pre pa yme nt cove na nt.
 E xh i b i t 2 I ro n o re S pot Price c m Chi na (62 % 2 002 t o 2 012 (US S /ton)
Fe )from

Iron ol· e
S Too. 00

5180.00

5160,00

5140.00

512 0.00

5100.00
L m

S O

54200' . 00

S o u rc e :] n d e xh l u n d i

Thn dowm rnl h -HARVARD

Iw
B U S I N E S S C H O O LI B R I E F C AS E S

m only In m .s H m S inh¢ r Adww d C o rm » mm· 201 8 a und, m lmbm of Wruq« A

nnnl · lm Oa
7

201 0 b oct 2 018.

 'HARVARD B U S I N E S S C H O O LI BRIEFCMES 9

m docw« N » e u» o¢ i n db m m in Pm l. s mm SinN'l C o fp o mm n m 2 0\8 I t b ·nm In* m d-Aba«=» d ib nm m b o« t 2 010

 N twmh Minln& inc.
03-54 a r

Co ns ump ti o n,a n d S te e l P ro d uc ti o n
C o u n t ri e sin I ro n P ro d uc ti o n,
Exh ib it5 Wo rl d Top 10

(Million Tons )

L o c a ti o n
Wo rl dI ro no re no d uc ti obny S m e lte r
2008200920102011
C o u n t ry
2 005

5887078248801,
2 006

m]m 2 007

Chi tu 42 D
m 299342394433480
Aus tra lia 26 2

355355300370390
140]40180220245230240
2 80 318
Bra z u
India
11010585100101100
8056727880
40404253555955
Rus s ia 105

54535254275054
Ukr· i n e 73 T6

30343331323737
S outh Africa

19203232332830
US
n mda
Ira n
R m o f Wo rl d 2 6? 315248262134134
2 46

WorldTotall, 6 80 1.9 0 0 12002300140009018

Wo rl dI ro no re Com um plion
2007200820092010 2 ml

Chitu.524649746750
2 005 2 006
C o u n t ry
15
139138107132130
77828277687777
M5 93?

44444750«
}rp* n 133 135

5368
41444648466262
R u «ia

54525756415153
S o u t h Ko re a

586157553148
M»

58615? 50414446
Bra z il

46495047324744
US

16161715131521
Ukr· ine
Ge rm· n y

19519520619?
T * iwa n
mo f Wo rl d 142179175
Wo rl dT o t a l 1.2 4 6 1, 3 8 8 11,4831,4301,6411,729
Wo rl dS te e l m d u m o n by S me lle t L o c a t i o n

Couniny 2 005 2006200720082009 mo m

o i ru 488499567626684
11612011988110108
9399979158
348 4 21

39435055586672
}* p *u 112

nn-....53485868 65707268596760
US
Bl 86
mh

4547494633«
R mh

-'"'"1
39414337303335
32313434273335
44

21232526252934
Ukr· ine
Bra z il

2762862762247256
Tu rhy
R e #o fWo rl d 2 63

Wo rl dT o t a l 1,10511161301,304 1, 19 7 U 94 091
S ource i. US
S u rvqa nd mmbn B

10
WEFCAS ES I H AR VAR D B U S I N E S S8 C H «x» L

m docunrlnl il b¢ ur* m hm mrm S uhre rd ·

C« wa h Fm *ne * 2 01a o inda n l m a u »d M* n** m · «-AI 1 m m b *d 1 \r· n oa
z 01a » oa z ola
 ci d cs
8

sggb g8

* dm i Wuwontylnm. S mt»'*
: