• BHP Billiton Limited
• Website: www.bhpbilliton.com

Industry:

Metals & Mining

Fiscal Year-End:

Jun 10

BHP is a supplier of a broad range of commodities across the globe. The company has portfolio of US$45.3B in high-quality assets that include iron ore, coke and thermal coal, copper, nickel, alumina/aluminium and petroleum. There are also strategic positions in manganese, diamonds, lead, zinc, gold, silver, uranium and molybdenum. The clients are widely and evenly spread across the globe. New projects under development and approved amount to US$14B.

The company was incorporated in 1885, working the Broken Hill lead/zinc mine in NSW. Mineral interests were expanded to include coal and iron ore, in part to supply its steel-making business, which commenced in 1915. The Petroleum diversification was initiated in 1960, with first Bass Strait production in 1967. The traditional steel businesses were spun-off in 2000 and 2002. In 2001, a dual-listing merger with UK-listed Billiton was approved.

The mining industry is becoming increasingly consolidated, and the BHP Billiton dual-listing merger is such an example. The outlook for the resources industry is closely linked to the world economic growth and the supply/demand balance for raw materials. The growth in demand in Asia, particularly China, is promising for higher average commodity prices in this decade, provided new supply does not come on-stream too aggressively ahead of consumption.

BHP is a leader amongst global resource companies, with the key differentiating factor being its Petroleum division, which represents about 15% of net operating assets. All other diversified resource companies are focused on mining, whilst oil companies tend to divest mining assets. This gives BHP exposure to a commodity that provides a natural hedge against increasing energy prices that have a negative impact on mining company profits.

Europe represents 35% of sales by destination, closely followed by the fastest growing region of China/Asia/Japan at 33%. North America is next at 11%, with Australia at 8%. Most oil and metals are sold into the global spot markets, whilst gas, coal and iron ore are typically sold under long-term contract arrangements with utilities, large industrial users and steel plants. Key competitors include Rio Tinto, Anglo American, Alcoa for aluminium and CVRD of Brazil for iron ore.