Barrick Gold Corporation - Supply Chain Management - Assignment Example

BARRICK GOLD UNIVERSITY NAME INTRODUCTION Barrick Gold Corporation centers its goals and objectives on protecting the environment, the welfare of the people and maintain excellent ethics. The Company remains Canadian based and has expanded mainly through acquisitions and exploration. The corporation mainly undertakes gold mining as a business. They place a high emphasis on developing and enhancing the lives of the communities in which they operate[Bar12]. The tough environmental laws, government’s restrictions, hostile communities and the falling gold prices seem to affect the gold mining enterprise. The value of the company in the stock market appeared to have dwindled due to the unforeseen challenges experienced. QUESTION 1 Respect to the stakeholders of the business remains fundamental for the attainment set goals. The company tends to respect and uphold human rights when undertaking commercial activities. It also aims at creating equality and the recognition of the individuals the company interacts with every day. Compliance and care for stakeholders remain a guideline to the activities of the enterprise. According to International Transparency reports, most companies fail to meet the minimum levels of getting transparent on the issues affecting their businesses. They fail to remain transparent to the concerns of the stakeholders. There has been a great deal of problems that the company remains exposed to when conducting its operations. Some of the issues experienced by the corporation seem long running. One of the most notable problem experienced by the company remains the construction of enhancement program in Papua New Guinea in Porgera. In regards to this project, rape cases by the officials have occurred and environmental problems among many other issues. However, there exists a significant difference between Barrick’s website and protestbarrick.net regarding the same subject[Mar11]. The company fails to talk of some of the concerns experienced in Papua New Guinea. They fail to remain extremely transparent on theproblems, and this affects the stakeholders’ perspective on the company. In the website of the enterprise, there exists a summary of the reports from their meetings. The reports seem very short and lack sufficient details. The act of summarizing instead of providing sufficient details gives the impression of rather a dormant company. A company is willing to do everything possible to cover up some of the issues so as to keep the stakeholders in the dark. The stakeholders possess the right to information and in Barrick’s case there exists less consideration to transparency. In the corporate world, most companies tend to state their efforts on how an issue remain handled instead of addressing the concerns brought about by the issue[Kra]. There exists a great deal of partialities and conflicts of interest. The governments do not seem to act as peacemakers or arbitrators on the issues even if some of the parties involved remain their citizens. Companies whose primary concern remain complying with the legal requirements miss the point. The legal requirements, in some cases, remain not in line with the perceptions of the public. Barrick remain aimed at complying with the legal demands of the countries in which they operate. The company seems to forget that the people who form part of the stakeholders have a significant say. There remains an important difference between legitimacy and legality in business. A business may be legal, but its operations considered illegitimate[Pau11]. In some cases, we see that the Pascua-Lama project experiences considerable opposition because some of the development projects undertaken in the public eyes remain ways of buying them off. Even though the project remains legal, its legitimacy remains at thequestion. Indeed, Barrick could do more regarding the concerns of the stakeholders. The company should work on the transparency problem since it seems a great hindrance in solving the shareholders concerns. The company should consider the governance and the constituency of the advisory board. The advisory council should give more consideration to the global nature of the enterprise and its impact. Thedispositionof the international stakeholders should remain a high concern. To continue, the reporting of the activities and problems as discussed by the advisory board should remain in the hands of external sources. In the end, the stakeholders will determine whether or not the company possesses transparency. QUESTION 2 Primary stakeholders refer to individuals directly affected by business activities[Tat06]. The effect may seem negative or positive. In some instance, the actions may remain on both sides of the equation. In one case, an action may positively affect a certain group and negatively affect another group[Oto02]. The primary stakeholders in the case of Barrick Gold enterprise remain the residents of the countries in which the mining occurs. Other primary stakeholders include the shareholders, the managers and employees, the suppliers, customers, and creditors. The shareholders always receive a great deal of returns from the companies’ investments. The shareholders in most cases get affected when the value of the shares declines in the stock market. Due to the problems experienced by the company, the stock value fell by an estimated 50%. The fall in value affected the shareholders as they underwent losses. Some individuals advocated that the company should de-listed from the New York Exchange listing. The community forms a significant part of the shareholders. In most cases, Barrick enterprise undertook community development programs that aimed at giving back to the society. The Lama project remains a benefit and a problem to the people of Chile and Argentina. The project would create about 1600 job opportunities and reduce poverty levels in the desolate regions. However, the project remains opposed by some of the members of the community as it presents environmental problems. The high levels of rock crushing would destroy the land, and the chemicals would pollute the waters. The fluctuation of prices affects job security because of the effects of downsizing in the organization due to the continuous losses made from low prices[Hof01]. The fluctuation of gold prices also affects the market share of gold about other minerals like diamonds. According to economics, gold remains a good of ostentation whereby a fall in price makes luxury consumers to shift to other more expensive minerals[Man]. The behavior exists as a result of the need to identify with a certain class of goods. There exists a significant difference in terms of dealing with local stakeholders and International stakeholders. To begin with, the identification of stakeholders at each level and their issues remains very crucial. In most cases, the toughest part of the extractive sector does not involve obtaining the raw materials, rather managing the relationship with the communities around the mine. Gaining an understanding of the stakeholders remains a significant challenge for poor management of them affects mining operations. In most cases, the relationship at the international level requires a lot more attention. The difficulty and complexities result from the differences in not only language but also culture among other things. The managers ought to learn to understand the culture and even be able to speak native languages so that they can manage their operations in a better way[Hof01]. The ineffective engagement of the stakeholders may affect the reputation of the company at both the local and International levels. In Papua New Guinea, the rape incidences tarnished the reputation of Barrick Company. The main difference in terms of dealing with the international and local stakeholders comes as a result of differences in culture and language. However, in both cases, there are certain principles that foster good relationships. The engagement of the stakeholders should always be mutually beneficial. The stakeholders tend to maintain long relationships and commitments because each and everyone can be able to attain their goal. In the case the Barrick Company, in exchange of mining, the company gives back to the community through development projects. Barrick enterprise holds dialogs with the stakeholders with the aim of addressing the issues affecting the business. In most cases, the company remains keener with the local stakeholders due to the reason that they need to maintain a reputation. QUESTION 3 According to the World Bank, the social license to operate results from a consensus of the stakeholders and the communities[Vit00]. However, this remains among the requirements for a social license. The acquisition and maintenance of the consent of the groups of the local stakeholders remain crucial. The maintenance remains important as the criteria for acceptance by the local stakeholders keep on fluctuating. The acquisition of a social license of operating (SLO) seems relevant to extraction companies because, without the permission of the local stakeholders, the mining process and managing assets becomes a significant challenge. Over the last decades, the rights of the indigenous and local populations near the mining areas have increased leverage on the mining companies. In the Barrick companies’ case, in the EIR process, demonstrators left chunks of ice in Santiago at the presidential palace. The acts symbolized the impact the mining had in the destruction of the glaciers. The demonstrators possessed the right to demonstrate against the destruction of their environment. The violation of the environmental permit by Barrick that caused the water to flow through the extraction site led to the suspension of the construction of Chilean project. The resulting effect remained that the company underwent certain cost overruns and other losses. Therefore, this proves that social responsibility and compliance remains crucial for the success of any extracting business. The projects risks associated with the mine get minimized through the social license. It continues to be extremely hard for mining to occur if the establishmentfails to get consent from each and every one. Any extracting company experiences high levels of failure from hostile communities. The opposition in certain cases results in the closure of the mining activities. In the Lama project, the opposition by the environmentalists created obstacles and resulted to cost overruns. Some of the protesters of the Lama project claim that the development programs undertaken by the Barrick Company suggests that the company seems to buy off the members so as to take all profits unopposed. The company also remains accused of melting away the culture of the people through the introduction of education. The company cannot be successful as a result of the considerable opposition faced by certain groups. In extraction projects, it remains extremely crucial to understand the local and central government. In some cases, the government changes the terms of extraction demanding more share of the profits as compared to the initial agreement[Vit00]. QUESTION 4 The government of Chile imposed a fine on the company due to failure to comply with the environmental problems posed by their mining projects. The company failed to remain fully transparent on their mining activities in Chile. Upon another investigation carried out, the Environmental officials discovered that the Barrick failed to construct the systems they were to construct and, therefore, the need to stop the project arose. The company faced a $16 million fine for failing to comply with environmental problems. Due to the impact that mining has on a certain excavation area there exists no acceptable environmental consequence[Hof01]. The company ought to carry out excellent research to determine ways of conserving the environment at all cases. The company should undertake land reclamation activities in regions where they have finished carrying out mining projects. They should devise ways of preventing contamination of surrounding areas as a result of carrying out the mining activities. The strategies to prevent environmental problems remains crucial as no country will accept environmental degradation as a result of mining. Huge investments should remain undertaken on the conserving and maintaining a healthy environment to prevent unforeseen problems. The act of remaining mindful of the environment will increase the confidence of the surrounding communities who form the largest part of the stakeholders of the company[Mar06]. The company should also remain highly transparent regarding their mining activities ranging from the chemicals used, their disadvantages and what’s done to mitigate their environmental impact. Transparency will enable the mining company to thrive in the area that they carry out their projects. QUESTION 5 The company needs to change the management of the company to individuals that possess high competency and professionalism. The employees of the syndicate should also desist from wrongful acts and extreme consequences formulated. The company has to change its approach to social responsibility. There should remain asignificant consideration in terms of whether a certain community wants mining activities to occur in a certain area. The new management should work on maximizing profits on the remaining mines so as to increase the investor confidence. The Lama project should remain abandoned due to the considerablehostility and controversies coupled in its implementation. The company needs to work towards theacquisition of capital allocation skills. They remain unable to allocate funds in a more economical manner and return many of the challenges they are undergoing remain self-inflicted. The management should be vigilant on how it allocates funds towards certain projects especially the community development projects. The company has to stop theexpansion through acquisitions in poor countries as it remains a suspicious act in the eyes of the public. Barrick has also purchased oil assets with the quest of saving its financial performance situation. The company has also placed some mines in Australia for sales. The activity remains necessary for mines that seem less profitable and possess certain controversies. The company has also taken management of projects to contractors who appear to have everything under control. If the company delays the Lama project for a very long time, it risks pushing costs to higher levels. However, the company will free up some of the existing cash and be able to alleviate issues regarding the balance sheet. It remains better for the company to restart the project in future at a higher price of gold. The company needs to get into binding contracts in the countries in which mining seems to take place. The action remains as a result of the action by the government to demand a bigger share of the cake after the completion of a mining project. A binding contract will enable each party receive its share as per the agreement. The conflicts with governments and other parties will remain minimized as a result of this act. QUESTION 6 The Pascua Lama project has had serious challenges due to the uncontrolled disasters that the company faces. The problems mainly arise from the environmental inefficiencies experienced as a result of the operations of the enterprise. Barrick was forced to stop the construction of the project in Chile as a consequence of the environmental issues that arose. However, the project seems to go on in Argentina. Barrick appears to indicate that it would suspend the project as a result of failure to find a resolution to the problems faced. If the gold price keep falling and the Chilean government keeps dragging their feet, the project will remain abandoned on that side. However, there would be consequences for abandoning the project. In the short run, the balance sheet of the company would improve in a dramatic way as well as the pecuniary position of theenterprise. However, in the long term, the gold enterprise will remain sacrificing the low-cost production of about 800,000 ounces of gold from the project on the Chilean side. The reason remains the fact that the project seems a great catch for the company. Therefore, the company will face serious negative consequences on the cash flow and its profitability. At the same time, the company will appear to abandon a production gap that cannot cope with the existing activities and operations. Therefore, the Pascua-Lama project remains an important part of the future of Barrick that cannot get replaced. Even though the company will increase their confidence in the short-term, in the long run,they have to face the consequences of decliningbusiness. The uncertainties surrounding the length of the delay of the project, the high levels of debts faced by the company. Additionally, the possibility that the prices of gold will decline, mean that the share price of the company will continue to underperform as compared to that of other mining companies. There remains a significant likelihood that the company will carry out downsizing activities in the bid to save the financial position of the enterprise. The company seems to possess the need to maximizing the cash flow through the implementation of a decentralized model. The model will reflect the culture of the enterprise, with efficient and reduced spending including the reduction of costs and growth of profits. The company seems to increase the need to sell the non-core assets it owns. There exists a likelihood of partnerships and joint ventures where necessary and viable. An increase in liquidity levels implies that the company will tackle and solve its debts in a more disciplined and professional manner. The Barrick Gold case seems great implications in the gold mining industry. The company has created the need to address environmental problems in the mining industry. The case also brings to the impact mining industries have on the surrounding communities including the ethical concerns needed be addressed. The fact implies the necessity of gold mining companies to control gold prices through actions like restricting the supply. The illustrationimplies that gold mining industry needs to remain more vigilant on the environmental problems brought about by mining. The companies should invest a great deal in ways of conserving the environment during and after the completion of mining. The case also implies that the mining remains controlled more by the surrounding communities than the employers. The gold industry ought to devise ways of working better with the surrounding communities. The future gold prices will continue to fall unless the players of the gold market intervene. The social and environmental impacts of the gold industry should remain different from those of other sectors. The reason remains the fact that huge capital investments go into the mining. The process involves the utilization of explosives that contain chemicals that remain harmful to the environment. Therefore, the impact should be lowered because either way the pollution will occur. The levels should be controlled and hence it remains justified. References Bar12: , (Barrick Gold Corporation , 2012 ), Mar11: , (Wente, 2011), Kra: , (Kraus & Callaghan, 2014), Pau11: , (Paul, 2011), Tat06: , (Tatikonda & Mantel, 2006), Oto02: , (Otomar & Wehr, 2002), Hof01: , (Hofsede, 2001), Man: , (Mankiw & McKenzie), Vit00: , (Vitell, 2000), Mar06: , (Marin, 2006), Read More