Evaluation Of Operations For Tender – Allegiance Coal Limited

Company Overview

Discuss about the Evaluation of Operations For Tender Allegiance Coal Limited.

The title of the report is to evaluate the operations for the tender. The title itself suggests that the annual report of the company has been analyzed in detail so as to provide the recommendation as to whether the audit firm shall apply for the tender in the given firm or not. For the purpose of extending study the company Allegiance Coal Limited has been provided. The tender has been floated for the purpose of the audit of the company and the applications have been invited for the purpose of the audit from the audit firm. At first the nature of the operations of the company has been provided and then the laws or the statutes as applicable from time to time to the company has been discussed in regard to the reporting requirement of the company as to which type of reporting is required in case of the company. Thereafter the financial statements of the company as annexed in the annual report of the company has been analysed with regard to the different financial ratios and accounting ratios. These have been further analyzed with the identification and justification of the presence of the material misstatements if any and the degree of risk that it carries. Then the report has done the evaluation as to whether the company shall apply for the tender or not. With this the report has then done with the appropriate conclusion and recommendation.         

The company that has been provided for the purpose of this report is the Allegiance Coal Limited. The company is the listed company and have good track record and listed on the Australian Stock Exchange.

The company is engaged in the business of acquisition and the exploration of the metallurgical coal. It only works in those countries where there has been the good level of investment record and the nearly the lower level of the risk in political terms. It is also engaged in the developing of the cordial and healthy relationships between the company and the party to whom the goods or services are being supplied or rendered services (Company Official Website, 2017). The main part on the behalf of the company before proceeding with the particular project is that whether the capital expenditure if any that the company is required to plough in the project shall not be restricted and prohibited in any manner.   

Analysis of Financial Statements

The industry in which the company is operating is Mining Industry and as per the current scenario the mining industry is grooming and it has been grooming since the development of Australia. It’s because of the mining industry in which the company is operating the immigration to Australia has taken place. Mining Industry is regarded as the major contributor which helps in developing and maintains the Australian economy. It has been mentioned that approximately seventy percent of the steel produced is due to the usage of coal and that too metallurgical coal and the same has been now considered as the important item which helps in the manufacture of steel.  

All the listed companies have to follow the continuous disclosure and full disclosure framework so as to equip the users of the financial statements of the company with the required data so as to make the informed and effective decision. Otherwise the disclosure made will be of no use. Users of the financial statements include the shareholders of the company, employees of the company, financial institutions and stakeholders of the company. Annual report of the company along with the nature of the company provides as to what type of disclosure and the in which manner the disclosure is required to be done. Following disclosures have been made as required for the mining companies in Australia:

1. Continuous Review of Corporate Governance – First disclosure that is required by the law is to review the corporate governance matters on the continuous basis. Management of the company has mentioned in the annual report of the company as due to the mining nature of the company which is considered as the very high and risky business, there is the need that the corporate governance of the company shall be reviewed on the regular basis (Company Official Website, 2017). The Australian Stock Exchange has provided the listing guidelines under which the corporate governance principles are required to be complied by all the listed entities. Under the seventh principle of the aforementioned principle, there is a need to check whether the company is in the process of the recognition and the management of the risk. Under that major heading, there is the one sub head which requires the company to report the amount of material exposure to environmental risks and the means as to how the company is ready to manage those risks.
2. JORC Code – JORC code is referred to as the code developed by Australia regarding the reporting of the exploration results, mineral resources and ore reserves. The JORC code is the mandatory code which provides the classification of mineral exploration results, resources of minerals and the reserves for ores and that too in accordance with the confidence level that has been gained the geological area and the considerations made in the public report regarding the technical and economical matters (Ausimm, 2017). The reports which are prepared in accordance with the JORC code are the reports prepared for the purpose of the investors and the stakeholders. Earlier JORC code was the separate but now it has become the part of listing rules. It has been mentioned in the director’s report of the company that the company is not in compliant with the code of JORC 2012 and company has stated to complete that in due course (Company Official Website, 2017).
3. British Columbia Mining and Environmental Legislation – As per these legislation, the company is required to comply with requirements of different branches of the legislation which includes the Environmental Assessment Act, Mines Act and Environmental Management Act and so on. The company has considered the same while deciding and discussing regarding the project feasibility study of the project which is located in the western side of the British Columbia (Hutomo, 2016). The company has managed to provide 250000 tons per annum so as to have quicker permission from the British Columbia and thus has conducted the pre feasibility study (Company Official Website, 2017).       
4. Sustainability Reporting – It provides the company to reports about the environmental, social and political factors that are being considered by the company for the effective and efficient functioning of the company.

Although the mining industry have been facing many type of business risks nut in the given case, there are major four business risks which the company shall consider and take the steps to mitigate the same:

1. Digital Effectiveness – This is number one business risk which is being faced by the company engaged in mining and exploration. The company shall make an endeavor as to how the digital technology shall be employed. In the beginning there has been used the phrase as “no regrets” by the company. It is because of the mix of experiences both bad and good has been received by the companies. But still in the current scenario they have not adopted the digital technologies for carrying out their operations smoothly and effectively.
2. Competitive shareholder returns – As per the current scenario, the companies in the mining sector has not performed well in the distribution of dividends which shall otherwise be good as it is because of the shareholder money only the company has been able to operate their functions. Thus, the company shall engage in the maximum allocation of capital as dividend instead of capitalizing the profits for the year (Mitchell, 2017).
3. License to Operate – There has been the cases where many companies have been failed due to the non obtainment of the license to operate. Similarly in the given case the company has not complied with the JORC code 2012 and also have kept the extraction rate at the minimum because to have the license to operate very easily (ASX, 2012).
4. Managing Joint Ventures – Managing the joint venture project is very difficult and at times it affects the reputation of the company due to the non compliance of the rules and regulation mentioned therein.

On the basis of the above factors, although the company has not complied with the JORC Code 2012 but still it is maintaining and complying with the applicable rules and regulations on one hand and on the other hand making the full and continuous disclosure.

Conclusion And Recommendation

In order to conclude the report prepared has been exhaustive and detailed and has been able to achieve the objective of evaluating the results of the company in much better manner.

It is recommended to apply for the tender for the audit of the company. 

References 

ASX, (2012), “Reserves and Resources disclosure rules for Mining and Oil and Gas Companies”, available on https://www.asx.com.au/documents/rules/reserves_resources_disclosure_rules_report_consultation_feedback.pdf  accessed on 29-04-2018.

Ausimm, (2017), “JORC Code”, available on https://www.ausimm.com.au/content/default.aspx?ID=118  accessed on 29-04-2018.

Company Official Website, (2017), “Annual report” available on https://www.allegiancecoal.com.au/irm/content/corporate-overview.aspx?RID=370 accessed on 29-04-2018.

Hutomo S, (2016), “Voluntary Environmental Disclosure by Australian Listed Mineral Mining Company”,  Australian Accounting Review, Vol 105, pp 42 – 95

Mitchell P, (2017), “Top 10 business risks facing Mining”, available on https://www.ey.com/Publication/vwLUAssets/ey-top-10-business-risks-facing-mining-and-metals-2017-2018/$FILE/ey-top-10-business-risks-facing-mining-and-metals-2017-2018.pdf accessed on 29-04-2018.