Free Essay

Bhp Billiton and the Financial Crisis

In: Business and Management

Submitted By liam11
Words 2425
Pages 10
BHP BILLITON
Petroleum Sector

BHP Billiton is one of Australia’s greatest corporate success stories; having grown from humble beginnings in Melbourne, BHP is now a multinational commodities powerhouse and claims to be the world’s largest national resources company. (Annual Report, 2009 pp. B)

The BHP Billiton Petroleum sector has been the focus of big BHP investment dollars of late as the company looks to expand their operations. BHP-B Petroleum produced over 376,000 barrels of oil per day in 2009 and has maintained an impressive 9% annual growth rate since 2007. (Petroleum Annual Review, 2009 pp 5)
BHP Petroleum operates in many countries across the world and is currently undertaking oil and gas projects in Australia, The Gulf of Mexico, Algeria, the UK, Pakistan and Trinidad and Tobago with the intention to expand into Malaysia, the Fawklands and Canada in the near future. (PAR, 2009 pp 5)

The market for petroleum and indeed the mining industry as a whole was unsure what effect the global financial crisis would have and what action affected parties would take during the period. Regardless of the changes, such a large and important company as BHP would have to study the potential changes and start, if necessary, reformatting their financial planning/strategies and other control processes. These would have to be looked at on a whole organisational level; ranging from the BHP hierarchy all the way down to the smaller subsidiaries in order to accurately gauge the potential effects of the changes in the market. BHP put itself in a really good position early in the piece with its sensible investment strategy. BHP management identify, as they did in previous year reports, the need for caution whilst guiding such a large company through the current global recession. This recession equated to a slowing of activity in the commodities market which would have been a major concern to BHP management. The group investment strategy of investing primarily in ‘long-life, low-cost, expandable, export-oriented, tier one assets’ (BHP Annual Report, 2009 pp 6) was a major factor in the company being able to weather the adverse financial conditions. Tier one assets/capital were established by the Basel committee to set a standard for banks (and other entities) of their minimum capital adequacy requirements (Viney, 2009. pp 66). BHP management have obviously identified this as a precedent that would be valuable to follow in their company and have used it to good effect. Tier one assets include ordinary shares, general reserves, retained earnings, foreign currency translation reserve etc and are considered the highest quality capital. Tier 1 assets have many beneficial characteristics, including: • They provide a permanent and unrestricted commitment of funds • They are freely available to absorb losses • They do not impose any unavoidable servicing charge against earnings • They rank behind claims of depositors and other creditors in the event of winding-up. (Viney, 2009. pp 66)
In addition to the security of their flexible Tier 1 assets, BHP – through their financial planning and management controls – have also sought to maintain a solid ‘A’ credit rating as an added degree of collateral. The better the credit rating of a company, the more attractive a loan prospect the company becomes and the more likely it is to have loan applications approved. (Viney, 2009 pp 67)

Both these measures allowed BHP to maintain a relatively sound balance sheet in the face of a downturn in the demand for commodities, and will allow the company to take full advantage of the recovery of the industry and indeed the economy.

One of the main reasons BHP was able to emerge from the global financial crisis relatively unscathed was the growth of countries that have a high commodity demand; namely China. The economist credited with initially predicting the financial crisis, Nouriel Roubini, stated recently that the main factor in the recovery of the Australian economy – particularly the mining sector – is the continued growth of China, Australia’s largest commodities customer. (Hayes, 2009) In 2009 alone, while the world economy is still in recession, China’s GDP grew by 8.7% - the 4th highest growth of any country. This during a period where the so-called powerhouse economies – Japan (-5.3%) , The UK (-4.8% ) and the US (-2.4%) – struggled to operate efficiently. (Australia recorded a 1% growth over this period)
(World Factbook, 2010)

In doing business with China or indeed any foreign economy, BHP management would have to employ foreign exchange risk management processes in order to realise fully the risks associated with trading in foreign currency. The assets, earnings and cash flows of BHP are all influenced by the wide range of currencies in which they are traded. Movements in the exchange rates in these countries have the potential to impact BHP’s financial results. For example, even though the organisations’ performance in a transaction remains the same, its dollar value may change significantly due to changes in the relevant exchange rates. BHP, documented in their annual report, have explored their currency options and recognised the risks posed by foreign exchange risk. BHP conduct operations in many different cultures and frequently conduct trades using, among others, the Australian dollar, South African rand, Chilean peso, Brazilian real and the US Dollar. In order to try and reduce their exchange rate risk, BHP primarily use the US dollar (due to its frequency of use) in their financial transactions, borrowing arrangements, holding of surplus cash and even the way their financial figures are presented in their reports. For BHP Petroleum, the US dollar would be an easy alternative as it is widely recognised as the currency of choice when measuring the price of oil. Eg. ## US Dollars a barrel. (BHP Annual Report, 2009. pp 9)
BHP management note that hedging was a tactic considered to reduce risk but decided that the long-term benefits to shareholders were insufficient. (BHP Annual Report, 2009. pp 9)

As the stimulus article from ‘The Australian’ highlighted, the mining sector and indeed the petroleum industry suffered during the financial crisis. Treasurer, Wayne Swan, warned mining companies in 2008 that their industry would not be immune to the effects of the crisis; a warning which rang true with fellow Australian BHP competitor, Rio Tinto, forced to cut 14,000 jobs worldwide in an attempt to cut costs associated with the financial crisis (The Australian, 2008). This was just one of many worldwide cost saving practices being employed by company managers from all industries in order to survive the crisis. BHP itself cut around 6000 jobs worldwide in response to the slowing of demand and cash flow through the company. This figure didn’t spare BHP’s Australian operations, with over 2000 Australians laid off by the company last year. CFO Alex Vanselow assured shareholders that even though job cuts had to be made, BHP was still in a strong financial position due to the healthy state of their balance sheet – as mentioned earlier.
``The balance sheet allows us to continue investing like we're doing in iron ore, in petroleum, in other commodities, and we are prepared for, on an opportunistic basis, to look at acquisitions,'' (Vanselow, 2009 – As Cited in Hayes, 2009)
Even in the middle of the crisis, BHP’s strong financial base allowed them to continue investing where other companies were merely trying to stay afloat. During 2009, BHP invested a whopping US$1.9 billion towards capital projects with a further US$548 million towards buying land and embarking on new worldwide exploration programs (Petroleum Annual Report, 2009 pp 5). This is no mean feat considering the economic climate; with mining companies finding it difficult to secure funds. Cash flow is critical to a mining organization and the sources of capital usually obtained under more stable economic periods are in scarcity during the crisis. Low commodity prices have hurt the mining sector’s ability to generate revenue, banks are afraid to lend and lower stock prices reduce the attractiveness of offering additional shares to the public.
(Duncan, 2009 pp 2) This highlights BHP managements foresight in having enough cash and tier 1 capital in reserve to make such investments possible in less than hospitable economic times.

Comparative International Management Accounting processes are used by management to provide information for internal decision-makers to plan, evaluate and control an organisation. CIMA should provide management with information for routine internal reporting (cost management strategies, planning of new operations) and non routine/special reporting (investing in capital assets and establishing long range plans). CIMA has no set structure and is useful when looking to the future of a company. The above example of BHP’s investment in its Petroleum customer sector group is a perfect example of where BHP management have gathered information internally and used this information to plan strategic and tactical decisions. For such a massive investment (the $2.48bn invested capital assets and exploration projects) to be made during an extended period of financial uncertainty is a decision that could have a huge impact on BHP. However projections show that BHP may have times their run to perfection. According to Coffey Mining CEO, Dan O’Toole, the current economic environment is ideal for new developments.
“Logically the time to begin exploring and starting on a development is now because costs are down and resources are more readily available. This is actually a really good time to do exploration work in preparation for when people’s confidence returns and they are ready to put money into operations.” (Hayes, 2009)
It could be assumed that Comparative International Management Accounting and BHP’s strong financial stability have given company management the ability to lay low and internally report throughout the worst of the crisis, manage their costs (job cuts) and plan for future operations. The use of special/non-routing reporting would enable the company to fully realise its financial position and allow it to plan strategic and tactical decisions; resulting in 2009’s investment of US$1.9 billion in capital assets; effectively shoring up the long-term future of BHP’s petroleum arm of operations. BHP’s strong financial base and responsible/conservative approach to their finances have allowed them to continue investing and expanding during the crisis, where other companies may still be trying to consolidate their internal finances as opposed to contemplating further investment. Comparative Internal Management Accounting’s purpose is to give the company decision-makers the information they require to make decisions for the future of the company. With this apparently well timed investment in the petroleum industry – an industry that is expected to boom with strong demand coming from growing cultures such as China and India – BHP, through the use of CIRM have further stamped their authority in the petroleum sector.

Along with the planning aspect of management comes the performance evaluation phase. In order to have total control, companies must begin with their strategic objective and include all elements of planning and monitoring. Sufficient planning must be undertaken at management level in order to justify a major investment as mentioned above. It is especially important for multinational organisations to plan sufficiently as they will be subject to different cultures, laws and regulations, political agendas and economic climates. BHP for example would have to understand how to do business with Chinese and respect their different cultural traits and values in order to facilitate agreements. Another example is BHP’s operations in Pakistan and the well documented troubles in the country. Political agendas may come into action here and BHP would have to be wary of the ways in which they manage the Zamzama Gas Plant in Pakistan. (Petroleum Report, 2009 pp 18)
An interesting point to note and one that highlights the importance of the evaluation processes implemented by management, is the time it takes to convert a mine/oil deposit from exploration to production. Duncan (2009, pp 2) found that, on average, it takes from 7 to 9 years to bring a mine into production. Drilling for oil will probably not take that long but it would still require a substantial period of time to set up the oil drilling rigs and surrounding structures. Especially in an offshore location, like BHP has found in the Gulf of Mexico. During this assumed 7-9 year set up process, BHP would have to constantly re-evaluate the laws and regulations, political movements and economic changes in the host country.

In conclusion, BHP has encountered – among others - a drop in revenue and share price as a result of the financial crisis. However BHP management have given themselves the tools so the company can only remain a viable entity during this time, but also to excel in the face of adversity – particularly in the Petroleum Customer Sector Group. BHP’s financial planning and control of their company is second to none and they have shown foresight in bolstering their capital holdings and tier 1 assets to strengthen their balance sheet considerably.

3 years ago at the beginning of the financial crisis BHP Petroleum committed to, among other things, achieve world-class production performance and position the company for material growth. Through their internal mechanisms, in 2009/2010 – BHP delivered! (Petroleum Annual Report, 2009 pp A)

References

Annual Report 2009, BHP Billiton, Melbourne, Victoria.
Retrieved 20/5/2010 from http://www.bhpbilliton.com/bbContentRepository/docs/annualReport2009.pdf

Annual Review 2009, BHP Billiton Petroleum, Melbourne, Victoria
Retrieved 20/5/2010 from http://www.bhpbilliton.com/bbContentRepository/docs/2009PetroleumAnnualReview.pdf CIA World Factbook 2010, Country Comparison: GDP.
Retrieved 20/5/2010 from https://www.cia.gov/library/publications/the-world-factbook/rankorder/2003rank.html?countryName=Australia&countryCode=as®ionCode=au&rank=96#as Duncan, J 2009, The Global Economic Crisis – Worldwide Impact on Mining
Companies. Macleod Dixon LLP, Toronto, Canada
Retrieved 21/5/2010

Hayes, P 2009, Commodoties Set to Rise, Economist & From Crisis Comes Opportunity, Australian Mining.
Retrieved 21/5/2010 from http://www.miningaustralia.com.au/news/commodities-set-to-rise-economist and http://www.miningaustralia.com.au/news/from-crisis-comes-opportunity The Australian 2008, Global Financial Crisis Hits Mining Companies, Wall Street Journal. Retrieved 21/5/2010 from http://www.theaustralian.com.au/business/news/miners-slash-500-jobs-as-crisis-bites/story-e6frg90f-1111118333761 Viney, C 2009, Financial Institutions, Instruments and Markets, 6th Edition, McGraw-Hill, North Ryde, NSW

WAToday 2009, BHP to Cut 6000 Jobs Worldwide Amid Downturn, Business Day. Retrieved 23/5/2010 from
http://www.watoday.com.au/business/bhp-to-cut-6000-jobs-worldwide-amid-downturn-20090121-7m2j.html

Similar Documents

Premium Essay

Bhp Billiton - Rio Tinto

...annual reports of Australia’s two largest mining companies BHP Billiton and Rio Tinto and analyse their cash flow statements. The analysis requires evaluating the cash flow performance of these companies during the global financial crisis 2007- 2009.The global financial crises were originated in US because of the bloom/bubble in the housing prices. During global financial crisis many financial institutions failed to recoup their money from lenders and finally ended up declaring bankruptcy. The purpose of the cash flow statements is to provide information about the changes to an entity’s cash and cash equivalents over certain period of time. The cash flow from operating activities of the both companies shows both positive and negative signs as the companies were going through recession. Whereas both companies used external and equity source financing and thus made an efficient cost effective decisions from which BHP Billiton benefited the most. Finally it’s concluded that the both companies were successful in overcoming global financial crisis and alternative strategies affecting the profitability of the companies were presented. Introduction Last three years has faced the worst global financial crisis after the great depression of 1929-1933. The origin of global financial crisis was mainly in US starting from mid 2000’s and taking the whole world into account by the end of 2007. The main reason of the crisis was unsecured lending and then the failure of......

Words: 2721 - Pages: 11

Premium Essay

Bhp Billiton

...Submission: April 2, 2015 BHP Billiton Limited Introduction: BHP Billiton is world’s largest diversified natural resources company. The company was created by the merger of two companies, BHP Ltd (An Australian mining company) and Billiton PLC (An UK based Company). BHP Billiton has created long time share holder value through the discovery, acquisition and development of natural resources. In the last few years, BHP Billiton has faced some governance challenges in conducting their business around the world. For overcoming those challenges several strategic drivers has been taken by BHP Billiton. This report mainly focused on external and internal environment, strength and weakness, Governance challenges and strategic drivers of BHP Billiton. Overview of BHP Billiton: BHP Billiton is a Dual Listed Company (DLC) comprising BHP Billiton Limited and BHP Billiton Plc. BHP Billiton was created through the DLC merger of BHP Limited (now BHP Billiton Limited) and Billiton Plc (now BHP Billiton Plc), which was concluded on 29 June 2001. BHP Billiton is a leading global resources company. The purpose is to create long-term shareholder value through the discovery, acquisition, development and marketing of natural resources. BHP Billiton are among the world’s largest producers of major commodities, including aluminum, coal, copper, iron ore, manganese, nickel, silver and uranium, and have substantial interests in oil and gas. The headquarters of BHP Billiton Limited, and the......

Words: 7470 - Pages: 30

Premium Essay

Companies and Business Risk Auditing

...Business Risk Prepared by: Timothy Supandji Table of Contents EXECUTIVE SUMMARY 3 Factors in understanding company and business risk before accepting as New Client 4 Comparison of the Overall Financial Conditions of BHP Billiton Ltd and Rio Tinto Limited during the GFC 6 Explanation of risks associated with BHP and Rio Tinto Ltd during GFC 8 Managing Business Risk: BHP Billiton Ltd Vs Rio Tinto Limited 10 CONCLUSION 11 EXECUTIVE SUMMARY There are four purposes for this report. It attempts to provide description of what factors that the auditors need to consider in understanding a company and assessing business risk before attempting any audit work on a particular client. The second aim is to explain the comparison of financial conditions between BHP Billiton Ltd and Rio Tinto Limited during the Global Financial Crisis that occurred in 2007 to 2008. Further, the risk that is associated with BHP and RIO during the Global Financial Crisis will be explained. Finally, this report intends to explain of which company is better in handling and managing the business risk during the Global Financial Crisis. Factors in understanding company and business risk before accepting as New Client Generally speaking, at the time when there was a Global Financial Crisis, it has detrimental effect to the companies globally with downfall of share prices. Because of these results, all of the investors are forcedly lost their money. In addition to this, the global economic......

Words: 3025 - Pages: 13

Premium Essay

Contemporary Management in Bhp

...of which accounting technique should to be integrated into BHP Billiton’s contemporary management accounting system. Through in depth research this technique has been identified as the environmental management accounting technique. This result was achieved through the research of the strengths, weaknesses, opportunities and threats (SWOT) analysis and the identification of the critical success factors. A balanced score card was then created using the information gathered to be used in identifying the most relevant technique. EMA was the technique decided upon as compared to the other techniques as it is the most relevant to BHP Billiton as their industry deals day to day with the environment and society. It will create awareness for the harm that is being done to the environment and will encourage them to create the minimum damage to the earth. It will also assess any repercussions of their actions that may affect society and bring harm to people. By integrating the EMA technique, it will help the organisation to collect the most relevant information to their situation and will assist in the planning, controlling and decision making within that organisation. This will improve the organisations strategy in which to help preserve the environment and also affect their financial state positively. TABLE OF CONTENTS EXECUTIVE SUMMARY 3 TABLE OF CONTENTS 3 1. INTRODUCTION 5 2. BHP BILLITON LTD 5 2.1 SWOT ANALYSIS 5 2.2 ......

Words: 3460 - Pages: 14

Premium Essay

Bhp and Rio Merger

...........2 1.2 Problem Statement .....................................................................................................................2 1.3 Methodology ..............................................................................................................................2 1.4 Delimitations..............................................................................................................................3 2. Industry Analysis .................................................................................................................................3 3. BHP Billiton ........................................................................................................................................4 3.1 Background ................................................................................................................................4 3.2 Financial Standing .....................................................................................................................4 4. Rio Tinto ..............................................................................................................................................5 4.1 Background ................................................................................................................................5 4.2 2012 Performance and Uncertain Future ...................................................................................5 5. Merger...

Words: 5085 - Pages: 21

Premium Essay

Financial Statement Analysis

...Financial Statement Analysis: WOW, BHP and TSE compared Introduction Financial statements are often called “the language of business.” Thus, any leader in every area of business and non-profit management will need to know and understand how to read, analyse, and interpret the meaning and decision making implications of financial statements. Every accountant and financial analyst will need to be able to calculate financial ratios and analyse related non-financial data in order to see whether the company is successful or not and suggest what can be improved in the operations if needed. Therefore, there was thorough financial investigation of BHP Billiton, Transfield Services Limited and Woolworths Limited. In order to investigate these companies activity, the 2008 and 2009 annual reports were retrieved from official companies’ websites. Also general information on industry averages for various ratios was obtained from financial websites as well as ASX website. Specific events that could have impacted a company’s operations were followed on the related web-links. In order to make a financial decision, financial analysis of financial ratios was conducted. In order to have the most necessary information following ratios were considered to be most important in making investment decision - profitability ratios that measure a company’s earning ability, in the broad categories of margins and returns. The major margins in our case were gross profit and net profit......

Words: 5098 - Pages: 21

Premium Essay

Business Plan

...1.0 Introduction 1.1 Aim This assessment will critical review the process of BHP Billiton changes and detail practice application as result use the managing change theory. 1.2 Structure Critical evaluation Alternative change intervention Maintain the change 1.3 Main point previewed Implementation process Institutionalization 1.4 General background Diagnosing the problem 2.0 Critical evaluation Interventions: Intervention is a tool using when organization planned change in current situation. To effectively adapt and thrive in today's business world, organizations need to implement effective organizational development interventions (Bridges, 1991). Interventions are aimed at improving organization performance in group and individual levels; these changed are intended to improve the efficiencies and effectiveness in the functioning of the organizations. To achieve effective intervention needs to have valid information, free and informed choice and internal commitment of the organizations, also, it needs to linked with the firm’s vision and focused at the appropriate level of the company. Effective intervention is a mixture of actions; use to transfer competence to manage change to organization members. Culture change Culture change helps organizations develop cultures appropriate to their strategies and environments. Organization culture includes behaviours, values, beliefs and norms; it is the soul of the organization. When organization starts......

Words: 1821 - Pages: 8

Free Essay

Waqas Edited

...BHP Mining Company According to Austin (2013), BHP Billiton is a worldwide pioneer in the resources business. Shaped from a merger in the middle of BHP and Billiton, it unites an extraordinary blend of value, minimal effort asset resources, supplemented by an in number administration group resolved to work the advantages in an effective way. BHP Billiton initiated a plausibility study in 2002 into opening a nickel and cobalt mine and handling plant at the expense of $2 billion 35 km east of the Ravensthorpe. The undertaking was affirmed in 2004 and development initiated in a matter of seconds a while later. The plant known as the Ravensthorpe Nickel Project was appointed in late 2007 with first generation happening in October and the initial 5,000 tons being created by December 2007 (BHP Billiton, 2010). The plant was formally opened in 2008, after enormous expense victories and deferrals. Creation was required to add up to 50,000 tons of nickel for each year. In January 2009, BHP Billiton declared that it was suspending generation at the Ravensthorpe nickel mine uncertainly, due the decrease in world nickel costs brought on by the worldwide monetary emergency. Nickel costs, having come to a high of $62,000 per ton in 2008, had tumbled to around $12,000 per ton when of the mines conclusion (BHP Billiton, 2010). Vision and Mission statement of BHP mining According to Mehra (2013), BHP Billiton endeavors to make long haul esteem through the disclosure, improvement and......

Words: 2052 - Pages: 9

Premium Essay

Fortescue Metals Group: the New Force in Iron Ore |

...| CASE 2 | Fortescue Metals Group: The new force in iron ore | ABC 9/12/2011 | Contents Introduction 1 Analyzing the external environment 1 Demographic 1 Economic 1 Socio-culture 2 Political-legal 2 Global 2 Technological 2 External environment conclusion 2 Industry analysis 3 Profit pool 3 Porter five forces 3 Threat of new entry 3 Bargaining power of suppliers 4 Bargaining power of buyers 4 Threat of substitute products 4 Rivalry among competing firms 4 Industry analysis conclusion 4 Competitor analysis 4 Analyzing the internal environment 5 Tangible resources 5 Intangible resources 6 Value chain analyzing 6 Capabilities 6 Core competencies 7 Weaknesses 7 Current strategy 7 Future strategy 8 Concluding remarks 8 References 9 Introduction Fortescue Metals Group: The new force in iron ore is a new company in the Australia with new vision. It was founded in 2003 with the aim of lowest cost producer in order to complete with large players of industry. Its main customer is China. Its lowest cost structure is main reason behind getting huge business from china. It had to faced many challenges in the industry but its strong policies supported company to make its distinct position in the industry Analyzing the external environment Every business/ company has external environment with some positive and negative points. Below is the analysis of Fortescue external environment. Demographic According to......

Words: 2027 - Pages: 9

Premium Essay

Marketing

...jcc23black.qxd 21/11/06 1:01 pm Page 25 Corporate Social Responsibility as Capability The Case of BHP Billiton Leeora D. Black Australian Centre for Corporate Social Responsibility; and Faculty of Business and Economics, Monash University Corporate social responsiveness is what companies do in order to be socially responsible. This paper presents a case study of social responsiveness at the global mining firm BHP Billiton to illustrate a model of social responsiveness capabilities. Until now, corporate social responsiveness has described processes of environmental scanning, issues management and stakeholder management. The model presented here suggests that social responsiveness is rather understood as a cluster of five organisation-level capabilities that span an organisation’s culture and structure. The case study explores evidence for social responsiveness capabilities at BHP Billiton and considers management implications for the development of management abilities for social responsibility. Director of the Australian Centre for Corporate Social Responsibility, Dr Leeora Black is a consultant, researcher and educator focused on integrating social responsibility into business operations and strategies and measuring corporate social responsibility. Her work analyses complex CSR issues and problems and builds organisational CSR capabilities. She works with global firms, government businesses and social-sector organisations on integration of......

Words: 6245 - Pages: 25

Free Essay

Good

...report into the Australian state of the economy. The Sydney Morning Herald BHP Billiton has shelved two expansion plans in Australia worth at least $US40 billion, and miners have cut their spending on exploration for the first time since the global financial crisis. When BHP scrapped its $20 billion expansion plans for Olympic Dam it blamed soaring development costs, a high Australian dollar and falling commodity prices. Resources Minister Martin Ferguson has since declared it the end of the resources boom. The Prime Mister, Julia Gillard and the Governor of the Reserve Bank, Glenn Stevens, believe this is to be an exaggeration however and argue there are a number of major investment projects still in the pipeline. You can find more information on the mining boom and its effect on the Australian economy from the Australian Broadcasting Commission’s news and current affairs programs by using the video links on MyUni. After viewing the videos answer the following questions based on the material in them. In your answers, marks are awarded for the analysis of the questions using the models and graphs you have studied this term. 1 a) Economists have argued that the mining boom has been a windfall for Australia but it was not sustainable. What has been the source of the boom and why is it expected to eventually end? The shelving of plans to expand mining operations at Olympic Dam by BHP Billiton has been seen by many commentators in the media as a major blow to the......

Words: 923 - Pages: 4

Premium Essay

Master Zou

...Corporate Financial Analysis 25743 Autumn Semester 2012 Assignment 1 ON Done By: Student Name Ai Ling HONG Wendy LUONG David PARK Peichao WANG Ying ZHU Student Number 11261308 11159249 11174354 11282047 10679140 Page 1 Table of Contents: 1. Business Description 2. Whitehaven Coal Ltd’s Performance Vs ASX200 Energy Index 2.1 Profitability Ratios 2.2 Asset Utilization Ratios 2.3 Capitalisation Ratios 2.4 Market Ratios 3. Quality of Financial Data 4. Revenue & Profitability Growth Forecast 4.1 Industry Life Cycle 4.2 Sustainable Growth Rate 4.3 Macroeconomic and Technological Factors Affecting Growth Rate 5. Business Risks: Porter’s 5 Forces 5.1 Threat of New Entrants 5.2 Bargaining Power of Suppliers 5.3 Bargaining Power of Buyers 5.4 Threat of Substitutes 5.5 Rivalry Among Existing Competitors 6. Recommendation Pg 3 Pg 3 − 5 Pg 5 Pg 6 Pg 7 − 8 Pg 9 Page 2 1. Business Description ASX Ticker: WHC Current Share Price (5th April 2012) Market Capitalisation Shares Outstanding Revenue from Ordinary Activities FY11 NPAT FY11 Diluted EPS (cents) Whitehaven Coal Ltd is an Australian listed company whose main $5.67 operations involve developing and operating coalmines in NSW. $2, 814m 496m and the development of the Narrabi underground mine. Initial Currently, its focus is on coal production in the Gunnedah Basin resource assessment by WHC projected that the Gunnedah Basin is $622.19m able to support at least 1.5 million tonne per annum......

Words: 3239 - Pages: 13

Premium Essay

Thesis

...Business risks facing mining and metals 2012–2013 Organizations that succeed do so because they are best able to optimize the risk and reward equation for both strategic and operational issues. Contents The Ernst & Young business risk radar for mining and metals Executive summary The top 10 business risks 1. Resource nationalism 2. Skills shortage 3. Infrastructure access 4. Cost inflation 5. Capital project execution 6. Social license to operate Editorial — Prospects and perils: facing up to political risks in mining and metals 7. Price and currency volatility 8. Capital management and access 9. Sharing the benefits 10. Fraud and corruption 3 4 10 11 14 17 20 23 26 28 32 35 38 40 Under the radar Getting prepared 42 46 The Ernst & Young business risk radar for mining and metals Up from 2011 Down from 2011 Same as 2011 New entry The risks closest to the center of the radar are those that pose the greatest challenges to the mining and metals sector in 2012 and into 2013. The business risk report Mining and metals 2012–2013 3 Executive summary 4 The business risk report Mining and metals 2012–2013 A more complex and extreme risk environment “The bottom line is that if returns start to wane, then there is a greater imperative for organizations to tightly and more effectively manage their risks to maintain an adequate risk/reward balance.” Mike Elliott Global Mining and Metals Leader, Ernst & Young On the surface, the......

Words: 26988 - Pages: 108

Premium Essay

Critically Evaluate the Arguments for and Against Mining and Export of Uranium

...High Risk – Low Return: The case against uranium mining in Queensland Australian Conservation Foundation Australian Manufacturing Workers Union Electrical Trades Union Friends of the Earth North Queensland Conservation Council Queensland Conservation Council Queensland Nuclear Free Alliance The Wilderness Society Cover picture: Mine tailings dam failure at Merriespruit, South Africa gold mine. On the day of the failure 50mm of rain fell in 30 minutes, comparable to flooding rain quantities in Qld in recent summers (source: tailings.info) High Risk – Low Return: The case against uranium mining in Queensland 1. Overview 2. Overstated economic potential 3. Environmental Impacts 4. Radiation and Health 5. Uranium and Indigenous Communities 6. Inadequate Regulation 6.1 Unresolved regulatory and operational issues 7. Beyond mining 7.1 Transportation 7.2 The myth of the peaceful atom: Weapons Proliferation 7.3 The myth of clean energy from nuclear power 7.4 A positive way forward for Queensland 8. Conclusions This report was prepared under the joint auspices of the unions and environmental and social justice groups listed on the cover. March 2013. Authors: R. Taubenfeld, D. Sweeney, J. Green High Risk – Low Return: The case against uranium mining in Queensland In October 2012 the LNP government broke its clear commitment not to allow uranium mining in Queensland. This commitment was the position of the LNP at the March 2012 state election and was......

Words: 8778 - Pages: 36

Free Essay

Burning of Fossil Fuels

...BURNING OF FOSSIL FUELS NAME:- NAME OF PROFESSOR:- DATE:- BURNING OF FOSSIL FUELS The burning of fossil fuels is the major contributor to human caused climate change. Once taken out of the ground and burned , coal, oil and gas add to the amount of carbon cycling between the atmosphere and the oceans, soil, rock and vegetation. On human time scales, this transfer is irrevocable, once mined and burned, fossil carbon cannot be locked away safely underground again in the form of new deposits of coal, oil and gas, or in the form of carbonate rock, for millions of years. The transfer is also unsustainable: there is simply not enough “space” in above-ground biological and geological systems to park safely the huge mass of carbon coming out of the ground without carbon dioxide building up catastrophically in both the air and the oceans. At the most fundamental level, therefore, the climate solution revolves around initiating a new pathway away from fossil fuel dependence. Industrialized societies locked in to fossil fuels need to turn to structurally different, non-fossil energy, transport, agricultural and consumption regimes within a few decades to minimize future dangers and costs. Infrastructure, trade, even community structure will have to be reorganized, and state support shifted from fossil-fuelled development toward popular movements constructing or defending......

Words: 1695 - Pages: 7