The collapse of Pasminco: misjudgment, misfortune and miscalculation

Christine Brown and James Ma

Australian Journal of Management, 2011, vol. 36, issue 2, 287-312

Abstract: In September 2001 when Pasminco Ltd was placed in voluntary administration, it was the world’s biggest zinc producer with over 10% of global output. This paper examines the hedging strategies that Pasminco had in place in the years leading up to the firm being declared insolvent and documents the financial factors that contributed to the corporate collapse. We build a valuation model that illustrates in stark terms that the company’s hedging strategies materially reduced neither the exposure to market risk nor the probability of financial distress, and were a major contributing factor to the company’s downfall. The analysis in this case study contains valuable lessons for companies facing quantity and exchange rate risk.

Keywords: exposure; hedging; market risk; value-at-risk (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/0312896211410795 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:36:y:2011:i:2:p:287-312

DOI: 10.1177/0312896211410795

Access Statistics for this article

More articles in Australian Journal of Management from Australian School of Business
Bibliographic data for series maintained by SAGE Publications ().