Natural resources and the economy: planning

for successful growth

The industry has also become the world's leading producer of natural resources software and high-technology natural resources services Many of the ports, roads, railways and towns in Australia were built by exploration, production and downstream activities in the natural resources industry. Despite this impressive record, the industry must look to the future. As global demand for minerals spirals over the next 50 years, the challenge of the industry is to build an internationally competitive sector, underpinned by innovation and technology.
Acknowledgements: Australian Bureau of Statistics and Minerals Council of Australia.

4 Keeping in touch with the community

Community expectations of industry have changed greatly in recent years, particularly in relation to sustainable growth. One of the greatest challenges facing the world today is integrating economic activity with environmental integrity, social concerns, and effective governance systems. The natural resources industry has to balance economic competitiveness, social responsibility and economic stewardship through its operational cycle from exploration, natural resources and processing to export. The Minerals Council of Australia describes this as Enduring Value. There is a good deal of importance given to stakeholder process in sustainable growth and the denition of stakeholder in the natural resources industry can vary greatly according to the issue being raised, from the local community to government, employees, interest groups and shareholders. BHP Billiton provides an illustration of one of its approaches to sustainable growth. It places sustainable growth and the value of the community as central components of its company charter. As a result, it is addressing a number of initiatives to meet environmental, social and community needs, linking these to its business objectives. The Health, Safety, Environment and Community (HSEC) program is an example of such an initiative. In a structural context, at every level of the organisation, line managers are responsible for HSEC matters. Although they are supported by functional personnel who provide specialist advice and support in managing all aspects of HSEC, ultimate responsibility rests with the general and senior management teams. Diagrams 1 and 2 illustrate the signicance of its HSEC program within BHP Billiton.
Diagram 1: BHP Billiton HSEC program. Line management BHP Billiton Board Functional staff HSE Committee

3 A major industry player in action

Within the Australian and global resources industry, BHP Billiton is the worlds largest diversied resources company. BHP Billiton was created through the merger of BHP Limited and Billiton Plc, which was concluded on 29 June 2001. BHP Billiton Limited and BHP Billiton Plc continue to exist as separate companies but operate on a combined basis as BHP Billiton. BHP Billiton Limited and BHP Billiton Plc are listed on the Australian and London Stock Exchanges respectively. Global headquarters is located in Melbourne, Australia. The company employs 35,000 employees working in more than 100 operations in approximately 20 countries. BHP Billiton occupies industry leader or near industry leader positions in major commodity businesses including aluminium, energy coal and metallurgical coal, copper, ferro-alloys, iron ore and titanium minerals. It also has substantial interests in oil, gas, liqueed natural gas, nickel, diamonds and silver. In mid 2005, BHP Billiton acquired WMC Resources, a mining company with products essential to Australias exports, which will contribute nickel, copper, uranium and fertilizers, as well as development and exploration interests. BHP Billiton is a dynamic and diverse organisation and one of the worlds most successful companies, operating in a constantly changing environment. The Case Study shows how a major player within the natural resources industry approaches the challenges and opportunities presented by expansion of the industry.

1 Introduction
Successful economies depend on vibrant and growing industries. Particularly since the Second World War, and as a result of our wealth of natural resources, the Australian economy has had a heavy reliance on the natural resources industry as a provider of direct and indirect employment, producer of export income and for stimulation of infrastructure development.

2 The natural resources industry in prole

According to the Australian Bureau of Statistics (ABS), mining is dened as the extraction of minerals occurring naturally as solids such as coal and ores, liquids such as crude petroleum, or gases such as natural gas. By this, or by other denitions that are used, the natural resources industry is very signicant to the Australian economy and society. The productive primary activities of natural resources companies are often the start of a ripple effect the extracted mineral, liquid or gas results in a range of downstream economic activity in secondary sectors, for example car manufacturing, and in tertiary sectors, such as car sales. Consider the following facts in relation to the industry: As at February 2005, over 100,000 people were directly employed in natural resources operations In May 2002, the average weekly earnings for all employees in the natural resources industry were $1,504 compared to the average of $687 for all industries For 2002-3, the industry offered a 13.3% return on assets to investors Merchandise exports during 2003-4 (classied to have their origin from natural resources industry) represented a massive $28,551 million this makes the natural resources industry a major export earner relative to other industries

BHP Billiton Executive Committee

Corporate HSEC HSEC Forum

Customer Sector Groups

CSG HSEC Representatives HSEC Networks

Sites

HSEC Personnel

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Diagram 2.

Charter HSEC Policy HSEC Management Standards Company-wide Procedures, Protocols and Guidelines Business-based HSEC Management Systems Operational HSEC Procedures

These two centralised marketing teams incorporate all the functions required to manage product marketing and distribution from nished goods to nal customer delivery. Product structuring, as well as third-party aggregation and trading, also forms part of the core capabilities of the companys marketing effort. In addition to these central marketing teams, many specialised marketers are located in regional ofces around the globe. They are close to the market and understand the environment in which different business customers operate.

7 Responding to a changing business environment

The external environment for global companies is dynamic. Changes occur at local, national and global levels. Stakeholders within this environment can emerge or change. This dynamism is no better illustrated than by developments in what are commonly referred to as the BRIC countries Brazil, Russia, India and China. These countries are representing new opportunities for global resources businesses such as BHP Billiton. These are, however, very different and constantly changing. Strategies have to be put in place to ensure BHP Billiton can service traditional markets, such as Australia, Western Europe and Japan, while capturing value adding growth opportunities in the BRIC countries. Some strategies include: Deciding whether a country is to be predominantly a producer (such as Russia) or a market (such as China) Conducting feasibility studies for programs and projects the cost and benets need to be carefully assessed before business decisions are made Developing an understanding of the risks of operating in these new locations these risks can include political, nancial or be market related Developing the skill base required.
Diagram 3: A market or resource-rich?

8 Conclusion
The signicance of the resources industry to the Australian economy is undeniable. Businesses, such as BHP Billiton, operate in an ever-changing marketplace and have developed a range of systems, programs and strategies with key stakeholders to ensure ongoing, long-term success. They must, however, balance economic competitiveness, social responsibility and environmental stewardship.

6 Valuing employees
Developing a world-class professional workforce is vital to the Australian minerals industry as global demand increases for minerals. The challenge for the minerals industry is to build an internationally competitive sector. The industry requires a competent workforce made up of professionals with highly sophisticated technical skills, knowledge, social competence and leadership skills. Employees are vital to the success of any business and are key stakeholders in the business. BHP Billiton takes the approach of offering value and opportunities for employees. In turn, BHP Billiton has expectations of its employees. BHP Billiton offers: Superior leadership, vision and direction Jobs with challenge, scope and accountability for results

GLOSSARY
Charter A statement that outlines the purpose, values and principles that guide the organisationss activities. Diversied The participation of a business in a range of different sectors and/or industries. It can result in improved income streams and a method of spreading risk. External environment Those factors that affect a business but are actually external to it. Consists of macro (such as economic conditions) and operating (such as competitors) components. Infrastructure The basic framework or underlying foundation established in a country or community in which business, industry or other societal functions can develop. This can include transport and other facilities, utilities, buildings etc. Line managers Managers directly responsible for the production and delivery of the goods or service. Marketing The range of activities that relate to identifying, anticipating and satisfying customer needs (protably) by means of standard tools such as market research and promotion. Merger Where two companies join together on an equal footing to operate as one business. Stakeholders A person or group who has an interest in how a business operates or functions. Examples include management, owners, employees, customers, shareholders, the local community and government. Sustainable growth Development that does not exhaust in the short term those resources that will enable the development to continue in the long term. Takeover The gaining of control of a business.
The Australian Financial Review and Australian Business Case Studies Pty Ltd. Whilst every effort has been made to ensure accuracy of information, neither the publisher nor the client can be held responsible for errors or omissions in this Case Study.

The HSEC program also involves management systems, policies and procedures. All sites conduct audits to assess their level of compliance and the achievement of targets. A comprehensive annual report of the HSEC program details these results. Whether it is health and safety issues or general environmental requirements for new development programs such as specifying mine closure from the outset of planning for a new mine, specic approaches to sustainable development are required by all members of the natural resources industry as it tackles the challenges and opportunities of expansion.

Attractive performance-based rewards. And in return expects: Alignment with the company charter and strategy, business model and key performance measures Results-focused superior performance and entrepreneurship Commitment to self-development and accountability for marketability.

5 Valuing customers
The needs of the external customer drive businesses. Considerable physical, human and nancial resources and time are used by businesses to understand how their customers do business. By getting to know customers markets and products, the business will be in a position to better serve their needs. In the case of BHP Billiton, customers are as diverse as its products and operate in a range of markets. To enable the provision of an effective response to customers needs, BHP Billiton has designed the organisation around seven Customer Sector Groups. These are: Aluminium Stainless Steel Materials Base Metals Energy Coal Carbon Steel Materials Petroleum

Supply capability relative to demand highlighting various countries predominate status as a producer or market.

Consolidation is another strategy that the natural resources industry is able to use to grow the industry in Australia. Consolidation might take the form of, for example, mergers and takeovers. The WMC Resources example in Section 3 of this Case Study is an example of a takeover whereby that companys businesses will be integrated into a larger company. There are many other examples throughout the history of Australian mining. According to the Minerals Council of Australia, Australias minerals industry has successfully demonstrated its capacity to perform in international markets. Its future performance will depend in part on economic conditions in Australia maintaining that competitive edge, given increased globalisation of the industry. This will see established and emerging producers elsewhere looking to achieve the same economic success that Australia has had for an expanding minerals sector.

Diamonds and Speciality Products. Marketing activities are centralised in Singapore and in The Hague, Netherlands. The Singapore ofce focus is on the Asian energy market and on carbon steelmaking raw materials. The emphasis in The Hague ofce is on aluminium, base metals, stainless steel materials and the European energy coal market.

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