TREASURY

Treasury Management

Treasury Management

This paper intends to explore and compare Kazakhmys PLC and Eurasian Natural Resources Corporation PLC. Further it examines the treasury functions of both firms. It discusses the various derivatives employed by the firms such as Options, swaps and contracts. Derivates are used basically for hedging risk or making profit by speculation. More over, this paper discusses the various steps in risk management process that is utilized by the Treasury department.

Risks are a part of every business and every business must be able to cope up with the associated risks. In this regard, Small and Medium-sized enterprises in the United Kingdom, there are considerable number of risks which can be hazardous for small businesses if they are not paid attention to. Therefore, it is of immense importance to develop strategies to manage the potential risks so that any untoward situation can be dealt with smoothly without any hassles. (Meyer & Redd 2004, 43-49).

Kazakhmys PLC is a natural resources company with interests in copper, gold, zinc, silver, power generation and petroleum. It is the copper producer in Kazakhstan and worldwide with 17 operating mines, 10 concentrators and two copper smelters. Kazakhmys Copper operations are fully integrated from mining ore through to the production of finished copper cathode and rod. Kazakhmys Copper operates three coal-fired power and heating plants at Karaganda, Balkhash and Zhezkazgan.

Eurasian Natural Resources Corporation PLC is a diversified natural resources company with integrated mining, processing, energy, logistical and marketing operations. The Company has six operating divisions: Ferroalloys, which produces and sells ferrochrome, as well as other ferroalloys; Iron Ore, which includes iron ore mines, crushing, beneficiation and pelletizing plants, and a thermal power station; Alumina and Aluminium, which produces and sells its aluminium; Energy, which is a provider of electricity in the Republic of Kazakhstan; Logistics, which includes freight forwarding, wagon repair services and railway construction and repair services.

Discussion

Stock Price comparison of Kazakhmys PLC and Eurasian Natural Resources Corp PLC

(Source: markets.ft.com)

It can be seen that the stock prices of both companies have been following the same trend. The main reason is that they belong to same industry. However, the prices of both companies have been going down since the financial crisis has affected the whole industry.

Treasury Functions of Kazakhmys PLC and Eurasian Natural Resources Corp PLC

The usage of derivates by the non-financial firms is a rising trend that has been observed largely in many countries for the past few years. Usage of derivatives is an important aspect in the markets to reduce the risk in the firm's operation. The derivative is the financial instrument that is generally used by the firms in order to protect them from different risks. It can be said that the derivatives are used for deriving the definite value of any commodity. These are the future contracts between the buyer and seller that must take place in the future.

The derivatives are usually based on the future date on which the agreement has to be sold among the buyer and ...