Banro Corporation: Recapitalization For Sustainability In The Congo’s Gold Mining

In January 2017, Banro Corporation, a Canadian gold mining company in the Democratic Republic of Congo, underwent recapitalization to cope with financial distress, and to optimize its operations of mining assets. Since the commencement of commercial mining in 2009, unexpected social conflicts and operational challenges had led to significantly lower production than expected, with a large cost overrun, while the price of gold declined sharply from 2012. Would the recapitalization enable Banro Corporation to carry out its medium-term strategic plan of incremental growth by operational improvements, through cost reduction and throughput expansion over a five-year horizon? How could the company achieve its long-term goal of being a model of excellence in sustainability?

This case is intended for senior undergraduate and graduate-level business school courses dealing with corporate restructuring and turnaround strategies, business and society, stakeholder management, competitive strategies in emerging markets, globalization of state-owned enterprises, and corporate finance. After completing the case, students should be able to do the following:<ul><li>Understand the competitive environment and strategies (particularly, non-market corporate social responsibility strategy) in the natural resources extraction industry in developing countries.</li><li>Understand the rationale of recapitalization and its effect on corporate value as well as on operational performance and risks (particularly in terms of obsolescing bargaining).</li><li>Understand the optimal capital structure, as well as the pros and cons of debt and equity financing (given various criteria such as a tax shield, operational risks, industry growth opportunity, and uncertain prices of extracted natural resources).</li><li>Consider both the external and internal environment at the corporate and operational levels, and recommend a comprehensive strategy for Banro to achieve its medium- and long-term goals.</li></ul>

• recapitalization, capital structure, resource extraction, obsolescing bargain, expropriation risk, social conflict, stakeholder management, state-owned enterprise