International Corporate Finance - Business Report Essay

International Corporate Finance - Business Report - Essay Example This is because South Africa is one of the major producers of gold in the world. The Foreign Direct Investments policies of the country and a suitable market entry mode have been suggested in order to direct KM an entry path towards South Africa. Table of Contents Executive Summary 2 Introduction 5 Background 5 Mission of King Minerals Limited (KM) 6 Outline of the Study 6 Country Risk Analysis 6 Political Risk Analysis 6 Government in South Africa 8 Government Policies for Mining Industry 8 Economic or Financial Risk Analysis 9 Gold Mining Contribution to GDP 10 Gold Mining Impacts on South Africa 12 Affect of Gold Mining on the Economic Condition 12 Taxation System for Mining Industry 13 Foreign Direct Investment 14 Conclusion and Recommendations 15 References 16 Bibliography 18 Introduction Background The study aims at conducting a country risk analysis to assist the Australian Investment Bank in advising about investment opportunities in South African gold mining industry. King M inerals Limited (KM), an Australian mineral firm wanted to float an ambitious program for exploring and extracting gold in Africa, so it is important to conduct an analysis of Africa and its gold mining industry. The political, social and economic record of South Africa to a large extent is influenced by the exploration of a glittering metal called Gold. The gold mining industry played a very significant role in the economy of South Africa, with respect to its employment opportunities, exports, financial growth and a huge contribution to the revenue generated from government tax. The gold mining industry contributed about 1.4 percent to the GDP of the country in the year 2004 (Kearney, 2012). However, in 2006, the prices of gold increased as the focus was mainly on productivity and cost. The production of local gold decreased by 7.5 percent, which was about 275 tons, but in spite of this the gold industry of South Africa is in the top most producer of gold in the global market, whic h is about 11.2 percent. Gold mining sector is critical for the South African economy. In the year 2006, this sector contributed R36.7 billion to the total export of South Africa, which was about 8.4 percent, and 1.1 percent of the GDP (Chamber of Mines of South Africa. 2008). The gold industry is also linked to the other developments in the country such as the infrastructure development, formation of capital, and also urbanization. The gold industry is taxed in a much different way that the other industries of South Africa. The taxes are imposed on a formula basis, while all the other mineral industries are taxed on a flat rate in case of income tax filings. However, the tax authorities in South Africa have decided to introduce revenue system that is based on royalty for imposing tax on the gold revenue mining. This regulation has been imposed since 2009 (PWC. 2012). Mission of King Minerals Limited (KM) King Minerals Limited (KM) is committed towards creating and delivering outsta nding values to the stakeholders through the development, exploration, and mining of gold and other valuable metals. Outline of the Study The study attempts to focus on the country risk analysis of South African gold mining sector and assess the various risk factors that need to be analyzed before developing a business proposal for exploration and mining activities in South Africa for gold. The study begins with a background of the gold mining industry of South