Diggin’ Deep Resources Ltd. (DDR) is a mining company with a twist, specializing in the extraction of rare earth metals like neodymium, dysprosium, and lanthanum—materials crucial for cutting-edge technology like smartphones, wind turbines, and electric vehicle motors. Founded in 2005, the company quickly became a key player in the race for these high-demand metals, which are essential for powering the future.
DDR’s property, plant, and equipment, worth over $6.6 million, includes advanced mining and processing machinery. However, much of this equipment is aging, reflected by $975,600 in accumulated depreciation. The company’s stock, valued at $585,300, consists mainly of processed rare earth metals awaiting export to tech manufacturers across the globe.
With $2.58 million in share capital, DDR’s ownership structure allows it to remain agile, attracting investment while staying focused on its core mission. However, the company’s trade creditors of $508,200 show that it relies heavily on suppliers for materials and services to maintain its operations.
Despite a hefty debt load, including $2.04 million in long-term borrowings, DDR manages to stay afloat with $720,500 in cash, keeping operations smooth while it continues to dig deep into the earth for the metals that power tomorrow’s technology.
Below is a breakdown of the key financial metrics for Diggin Deep Resources in 2024.
| Category | Amount ($000s) |
| Bank overdraft | 251.2 |
| Retained profits | 1,706.0 |
| Accumulated depreciation | 975.6 |
| Trade creditors | 508.2 |
| Stock | 585.3 |
| Share capital | 2,582.9 |
| Cash | 720.5 |
| Borrowings, long-term | 2,038.2 |
| Property, plant and equipment | 6,678.0 |
| Debtors | 335.9 |
| Other short-term loans | 257.6 |
Q1. Construct a fully labelled Balance sheet for 2024.
Q2. Calculate DDR’s working capital for 2024.
Q3. Comment on your answer to Q2.
Q4. Explain one advantage for DDR to operate as a private limited company.
Q5. Explain one reason why you think DDR’s shareholders are happy for the company to have so much debt.
Diggin’ Deep Resources Ltd. Faces a Critical Turning Point – 2025
It is now 2025, and Diggin’ Deep Resources Ltd. (DDR) is grappling with the biggest crisis in its history. An emergency board meeting has been called following the shocking discovery that one of the company’s largest and most profitable mining pits—responsible for driving revenue for the last 10 years—has been completely depleted. This unexpected event has left the company in turmoil, with severe implications for revenue and stock levels, which had stood at $585,300 in 2024. The sudden depletion has raised urgent questions about the company’s ability to fulfill existing contracts and maintain its position as a key supplier of rare earth metals to global tech manufacturers.
The board has identified two potential strategies to navigate this crisis and secure DDR’s future:
Option 1: Invest in New Mining Operations
DDR could seek additional funding to either purchase new land rich in rare earth metals or acquire an existing mine in another country. This strategy aligns with the company’s core focus and could restore depleted stock levels while ensuring long-term revenue. DDR’s $2.58 million in share capital offers a foundation for raising additional investment, but the company’s $2.04 million in long-term borrowings already places it under financial strain. Expansion into new territories would also introduce complexities such as legal requirements, regulatory compliance, and cultural challenges.
Option 2: Diversify into Mining Equipment Manufacturing
Alternatively, DDR could leverage its extensive industry experience to diversify into manufacturing industrial mining equipment. A unique opportunity has emerged to acquire a growing company that has developed groundbreaking technology for larger and more efficient drills and mining vehicles. This would allow DDR to reduce its reliance on resource extraction and tap into a new revenue stream. However, this pivot would require significant restructuring, reallocation of resources, and retraining of employees. It may also create tension with shareholders, who expect DDR to remain focused on its core mining operations.
DDR’s cash reserves of $720,500 and its reliance on $508,200 in trade creditors provide limited flexibility, making the stakes higher than ever. The decisions made at this critical juncture will determine whether DDR adapts to a rapidly changing landscape or risks falling into irrelevance in the face of this crisis.
Task: Using the information and data in the case study, recommend whether DDR should choose option 1 or option 2 to ensure a profitable and sustainable future for the business.