The Feasibility Study of Business Model Innovation in Gold Tailing Flotation Plant
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XYZ Company, part of a multinational company with extensive experience supplying chemicals to mineral processing companies worldwide, is exploring a new Business Model to expand its reach and become the manager of the mineral processing business. In this business model innovation, XYZ has opened a feasibility study to partner with Company A. Some of the aspects that are the focus of attention are capital budgeting for project funding, operational critical aspects in joint operations, joint operation analysis and risk assessment. XYZ's joint-venture project with company A has the potential to deliver an investment return of USD 10.28 M with an IRR of 32.57% for a project duration of 6 years. This shows that joint operations through vertical integration can deliver a more optimal return on investment than XYZ's conventional role as a chemical supplier. The Company's initial strategy of allocating 100% of its capital budget to equity proved to be suboptimal. Based on financial analysis, a 50% debt ratio is a more optimal capital budgeting choice for companies. The use of this ratio not only provides financial advantages but also reduces XYZ's debt risk, especially when the corporation seeks to enter a strategic alliance. To be able to provide added value for company A, so that company A wants to work together to make a joint operation with XYZ, XYZ must be able to improve operations at the XYZ flotation plant. Based on financial analysis, the minimum profitable recovery for XYZ is 32.3%. Risk mitigation measures to be carried out by XYZ include hedging to mitigate commodity price risk and conducting advanced resource studies. Hedging is applied at the alliance level to achieve optimal hedging benefits. The implementation of advanced resource studies will help companies make better forecasts and plan production.
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