FIN1FSA Financial Statement Analysis - Assignment Help on Financial Statement Analysis of Redstone Resources Limited

Introduction

Redstone Resources Limited Nickel, Copper, Iron ore, Phosphorous, Potassium, Gold, Silver, and Platinum exploration Properties Company focusing on the West Musgrave Region of Western Australia was founded in 1999 (Redstone Resources, n.d.) and is listed on Australian Securities Exchange since 2006 under the code RDS (ASX, n.d.) . According to the GICS (Global Industry Classification Standard) which is jointly developed by S&P Dow Jones Indices and MSCI, the organization is classified as Materials as per the GICS Industry Group. Redstone Resources Limited head office is based in West Perth (ASX, n.d.) . It is operating as a mineral exploration company which is focused on the Tollu project situated in the southeast side of the West Musgrave region (Bloomberg, n.d.).  It holds great interest in some properties which covers approximately 2,200 square kilometers in the West Musgrave region and 16 prospects covering around 214 square kilometers in the Tollu project, focuses on the Blackstone range project is also shown with an area covering around 33 square kilometers located in Brazil (Intelligent investor, 2015).

Industry Analysis

The mining industry in Australia is a noteworthy contributor to the country’s economy since 1850. It has added over 125 Billion dollars to the economic ground in the year 2017. It has added about 7.4 percent of the total gross value in Australia and is behind the financial and insurance sector. It employees over 126,000 people in 2017, several of the mining booms has brought in investment and has led to rapid growth in the income from the mining activities (Laporte, n.d.).  Mining is an export-oriented industry with bare to minimum processing offshore and since 2007 it is accounted for 50% to 60% of total national exports. Australia is amongst the top five global producers of gold, iron ore, lead, zinc, and nickel and holds the position as the largest uranium producer and fourth largest producer for black coal. It is considered the fourth largest mining country in the world (Australia - Mining, n.d.). Australia is the world’s largest exporter of coal, iron ore, bauxite and alumina (Laporte, n.d.). 

Rivalry amongst Firm

Mining markets main revenue generation comes from gold mining which accounts for up to 41% of the whole industry. In the financial year 2017, it was coal and iron ore mining that remarkably showed growth and became the largest revenue generator. The Largest mining company in Australia is MMG Limited – state-owned mining giant followed by Evolution Mining Limited and IIuka Resources limited which have achieved the highest market capitalization (Laporte, n.d.). The resources are limited and renewable with a similar demand and buyer for each firm with high exit barriers makes the competition fierce. 

Threat of new entrants

The leading threat to the market and RDS us the fluctuating price of the commodities internationally which greatly influences the performance of the division, the companies cannot plan future prospects of the project and it affects the budget of the corporation severely. Though new entrants in the industry do not pose a threat for RDS as the competition is fierce in this  industry, the high labor cost requires any new organization to go for automation in vehicles, drills and evacuation equipment’s, RDS has adopted the use of technology at a very early stage as it justifies the investment. The industry has high entry barriers and strict regulations and restrictions by the government. New entrants have to invest highly in the industry to obtain project sites and the return can be volatile due to unsustainable market and prices.