Gammon Lake (GL) is an exploration and mining company that is based in Canada but operates in Mexico. The minerals extracted by GL are mainly Gold and Silver and are sold to process and refining companies in their raw form.
GL possesses a management team who holds an abundance of intelligence and expertise. This knowledge ranges from accounting to exploration and all of the areas in between. This knowledge has allowed GL to create very accurate resource reserve calculations and feasibility studies.
In the last few years, Gammon Lake has acquired mining rights from multiple companies, thereby considerably increasing their mineral reserve, and the company’s size and ...view middle of the document...
After the initial capital costs have been covered, GL should expect to see high profits from these newly acquired mineral reserves.
Gammon Lake’s strategy is to be a low-cost mining company that is continuously expanding through acquisition and exploration in Mexico. With the amount and variety of knowledge held in management, GL has the capability to be as efficient as possible, thereby cutting costs wherever possible.
Considering that Gammon Lake’s strategy and vision both include being a low-cost company but their financial statements definitely do not reflect that. From 2003 to 2005, GL’s deficit harshly increases. Although revenue also increases, GL’s expenses are increasing at a more rapid rate (revenue 80%; expenses 91%). On the other hand, their growth strategy is to increase their production profile and mineral reserve base.
Gammon Lake is partially achieving their goals. In the last few years, GL has acquired multiple mining companies, which have resulted in a drastic increase in the scope of the company. This strategic goal could be even further achieved by expansion into other mining markets such as over seas or the USA/CAN market. As they are achieving the goal of expanding, they are not achieving their goal of maintaining low costs – but this is to be expected until the initial investment cost has been recovered.
Although Gammon Lake has been successful in the expansion within Mexico, the market is relatively saturated and mining reserves are becoming very limited. GL must take further action into expanding into other countries that contain a large amount of Gold and Silver, such as Australia and Peru.
This is a great time to take advantage of expanding into Australia as GL has just entered into a strategic alliance with Bolnisi NL of Sydney, Australia. This alliance could prove to be even more valuable than expected if expansion into Australia ensued.
With expansion into other countries comes the complexity of currency and fluctuations. GL must determine if expansion into these countries is a profitable investment and take into consideration all situation regarding currency and price fluctuations.
Gammon Lake has many vital...