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Goldcorp

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by

sheila le

on 29 July 2014

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Transcript of Goldcorp

Industry Background
Company Background
1954
Rob McEwen founded Goldcorp in Vancouver B.C
1994
Originally incorporated March 31
Headquartered in Canada
2013
Expanded their assets worldwide
Over 19,000 employees
was named one of Canada's top 100 employers by the globe and mall
Industry Background
Company Background

1954

Rob McEwen founded Goldcorp in Vancouver B.C
Originally incorporated on March 31
1994

2014
One of the world's fastest growing gold companies
Has over 19,000 employees
Was named one of Canada's top 100 employers
Five key attributes to Goldcorp's business:
Growth
Low cash cost
Maintaining a strong balance sheet
Operating in regions with low political risk
Conducting business in a responsible manner

Porter's Five Forces and SWOT Analysis
Industry Rivalry
Threat of new entrants
Relatively low
company is well established worldwide
strong network in terms of sales and its reputation
Bargaining power of suppliers
low
not dependent on one key supplier
large network
Bargaining power of buyers
high
price of gold is forever fluctuating
dependent on knowledge and information of the market
price of gold are well known and accessible
Threat of Substitutes
low
industry rivalry does exist
Strengths
existing distribution
well established sales networks
Weaknesses
exposed to industry wide cost pressures
increasing cost
economic return
Opportunities
reduce operational costs
Threats to a company
foreign operations
foreign currency
creates misstatement and negatively impacts inherent risk
Business Risk
Price fluctuations
- currency rates
Government Regulations
- differs all around the world
competitions
- industry is competitive in nature
Environmental/Social impacts
- deals with close area to rivers and communities

Corporate Governance Practices
President and CEO
, Charles A Jeannes
Chairman
, Ian Telfer
- Experience, knowledgeable about Goldcorp operations
Audit committee
, Doug Holtby, Beverley Anne Briscoe and Kenneth Williamson
- Help to ensure that financial statements are correctly reported using the appropriate accounting policies
- Constantly revising and reviewing the different Canadian and US regulations concerning industry standards to ensure Goldcorp is acting in the best ethical practice
Materiality
High materiality level for total assets
Users of the financial statements are not sensitive to misstatements as per previous audit history

$39,911M*1%= $399.11M
$39,911M*0.5%=  $199.55M
$27,945M*5%=$1397.25 M

$27,945M*0.5%= $139.73M
$2,83 3M*1%=$28.33M
$2,833M*0.5%= $14.16M
High
Low
0.5%-1% of total assets
0.5%-5% of SE
0.5%-1% of revenue
Fraud Risk Assessment
Incentives and pressure
-
faces strong competition
- market price increase
-
foreign exchange
Opportunities
-
manipulate impairment charges
Overall fraud risk is moderately low
-
good regulations and governance
- risk of misappropriation is minimal
- sales and discounts do not exist
- cannot reply solely on revenue because the remainder of their major assets are for their exploration

Planning Analytics
Common-size analysis
- compare the total mine operation costs
- production costs was 76% in 2012 and 77% in 2013
-out of that cost 21.4% in 2012 and 23.5% in 2013 contributed towards wages and benefits
- there was also an increase in cash value and decrease in receivables
Ratio analysis
- performed for 2012 and 2013
- compared to industry
- current ratio is 1.35 in 2013 in comparison to the industry average of 1.19
- quick ratio is 0.70 compared to industry of 0.77
- increase in debt-to-equity of 8%, in 2012 it was 35% and in 2013 it was 43%

Revenue and expenditure cycle

There are various mining sites all over the world and each of them are different sizes and have their own appropriate costs
We decided to focus on their top producer, which is Red Lake
Revenues $684M
Expenditure $233M
Cycle of process is not disclosed

Going concern assessment
Lawsuits
Top Audit Risks
Thank you!
By: Sheila, Michelle, Avijot, Arvind
Questions?
Have not incurred any pro-longed losses
Always tried to expand its market share in low risk area
Have 43% debt-to-equity due to the expansions during the year
We will continue to monitor the non-compliance with litigation

November 22, 2013
- Chile's Supreme court had frozen Goldcorp's El Morro gold and copper mine project. The reason being that they have not conducted the required consultation and that the mine could potentially pollute a local river
December 9, 2013
- Santa Cruz, Argentine authorities state that Goldcorp would have to pay about $3.2 M due to health and safety violations
January 29, 2014
- A mine in Quebec, Canada, sues Goldcorp, alleging they used confidential information and acted in a way not agreed upon in their confidentiality agreement during their takeover. Goldcorp let its offer expire after being outbid by two buyers
The control risk related to employee turnover is a concern and will be paired with a procedure to help address it
Inherent risk related to employee turnover is high
A global presence increases inherent risk because of Goldcorp's foreign operations
The audit risk is moderately low because there is minimal fraud that can occur due to Goldcorp's respected reputation. Also, previously audited statements illustrate that the financial statements were appropriately accounted for and free of error
Summary of Strategy
Procedures to address top audit risks:
Knowledge of health and safety standards will help mitigate violations
Finding a balance to reduce employee turnover by creating a loyal workforce that flourishes in an integrity filled environment
Currency conversions utilizing data software to reduce potential misstatement when accounting for foreign currency from operations
Research environmental policies before proceeding with mining operations in different countries
Mining companies gold mine, but it also includes exploration, extraction, processing and reclamation
Essential part of the development of highways, networks, housing and electrical.
Canada is known as one of the largest mining nations in the world. There are over 800 mining operations throughout the country
It contributes 5% of Canada's gross domestic product and 19% of its total exports
Now becoming a large component of Canada's overall economic success
please take out
your cell phone
please text the following code on your cell phone to answer the following questions (free of charge)
text code: 37607
What risk(s) does having a stable workforce include?
text the number
A) Inherent risk - 704202
B) Control risk - 704203
C) Both - 704204
Presentation Outline
Industry Background
Company Background
Porters 5 Analysis
SWOT Analysis
Business Risk
Corporate Governance
Materiality
Fraud Risk Assessment
Planning Analytics
Revenue/Expenditure Cycle
Going Concern Assessment
Lawsuits
Top Audit Risks and Strategy
please text the following code on your cell phone to answer the following question (free of charge)
text TO code: 37607
Q2: Which is the most appropriate (best) to consider when trying to gain an understanding of a company like Goldcorp?
to answer, text the number given
A) economy level - 725093
B) entity level - 725094
C) industry level - 725095
D) all of the above - 725096
E) or (a) and (b) - 725097

Current Mines
11 mines located worldwide in Canada, U.S, Mexico, Central and South America
Full transcript