SOA_FAP_Mod1Exercise01-01Assignment.pdf - Module 1 Exercise...

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© 2003 - 2013 Society of Actuaries | SOA_FAP_Mod1Exercise01-01Assignment.docx| Page 1 Module 1 Exercise: Can-Do Mining Introduction Module 1 introduced you to actuarial work and the Control Cycle framework used by actuaries to complete their work. The elements of the Control Cycle include reviewing the relevant External Forces while working through the Define the Problem, Design the Solution and Monitor the Results stages and while applying Professionalism to the work. In Module 1, you reviewed the history of the actuarial profession with special emphasis on how the Control Cycle has formed the foundation for actuarial work for some time. What is actuarial work? How would the famous actuaries of the past answer this question? We think the evidence is that they would have replied: “Actuaries apply actuarial skills to gather and analyze the best information they can possibly find about trends, risks, demographics and cultural practices while adhering to the Control Cycle when approaching a problem so that they can design solutions that minimize risk and monitor the results on behalf of their clients.” What are actuarial skills? Actuarial skills certainly include the application of the Control Cycle, the analysis of risk, the determination of mathematical equivalence, effective general business abilities and enabling skills such as being able to communicate the results of the work. You will be asked to use all of these skills in this Module 1 End-of-Module Exercise. As you work through the tasks described below, ask yourself these questions: Could this be a routine actuarial assignment in the future? Is the 15% contingency sufficient and reliable? What elements of the Control Cycle are covered in this exercise? What are the key or material elements of the problem? Who are the audiences for the written communication? Have I communicated clearly and in a way that my audiences would prefer? Questions similar to these form the foundation of all actuarial work. Your Role It is the end of 2005. You are an employee in the Finance Department of Can-Do Mining Limited (Can-Do), a Canadian-based subsidiary of USA Mines, Inc. Normally you spend your time on more conventional actuarial issues (e.g., employee and retirement benefits), but occasionally you are pulled into other matters. This is one of those times. About Your Company Can-Do is considering the purchase of the South Face Mine, which is owned today by Mountain Mining Canada Limited (MMCL). MMCL is a Canadian-based subsidiary of Mountain Mining Corporation, a U.S.-based holding company with operations located throughout North America.
© 2003 - 2013 Society of Actuaries | SOA_FAP_Mod1Exercise01-01Assignment.docx| Page 2 The Business Problem South Face Mine is located adjacent to the North Fork Mine, a property owned by Can-Do. If Can-Do purchases South Face Mine, its strategic location would enable Can-Do to cut the costs of operating its North Fork Mine by an expected $1.5 million the first year and will

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