New Earth Mining’s proposed investment in a South African iron ore project promised scale, long reserve life, and diversification away from volatile gold prices. But beneath the headline economics sat layered risks tied to leverage, political exposure, and commodity cyclicality. The analysis followed how project level cash flows interacted with sovereign risk, foreign exchange volatility, and restrictive debt covenants, testing whether apparent value creation survived realistic downside scenarios. While base case projections appeared attractive, sensitivity work showed that returns were highly exposed to iron ore prices and political stability. The recommendation emphasized caution, arguing that diversification only creates value when risk is priced correctly and financing structures are resilient to shocks outside management’s control.
