Economics for Business: Australian Mining Industry Report and Analysis

This report provides a comprehensive economic analysis of the Australian mining industry, with a specific focus on BHP Billiton. It begins with an introduction to the industry, highlighting its significant contribution to Australia's GDP and its export-oriented nature. The report then delves into BHP Billiton's operations, financial performance, and market capitalization. It examines the industry's background, including its growth phases, government investments, and the increasing demand for automation. The market structure is identified as oligopolistic, and key players are listed. The report analyzes factors influencing the demand and supply of the company's products, such as power plant design dependency, end-user mine equity, generation gap and government investments. Elasticity within the industry is discussed, along with the impact of recent events, such as the GFG investment, on the industry and the company. The report concludes with a summary of the key findings and insights.

Running head: Economics for business
ECONOMICS FOR BUSINESS
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Table of Contents
Introduction................................................................................................................................3
Introduction to the company......................................................................................................3
Industry background...................................................................................................................4
The market structure of the industry..........................................................................................5
Factors that influence demand for the company’s product(s)....................................................6
Factors that influence supply of the company’s product(s).......................................................7
Elasticity.....................................................................................................................................8
Impacts of an event on the industry/company............................................................................9
Conclusion................................................................................................................................10
Reference list............................................................................................................................11

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Introduction
Australian mining industry is having huge growth and potentiality in the near future.
The mining industry of Australia is one of the most expensive sectors that has contributed
about 7% to the GDP of Australia. The main characteristic of the mining industry of Australia
is, it is export oriented and during the year of 2007-2008, the mining industry contributed to
more than 50-60% of total national exports (Export.gov, 2019). The study will highlight the
contribution of BHP BILLITON behind the growth of the mining industry. The study will
also draw inference on the performances of the mining industry and will highlight the factors
that are mainly influencing the demand and supply of the products that are being
manufactured by BHP BILLITON within the Australian economy. The significance of the
study is that it will reflect the overall production ability of the mining industry in Australia
and it will also highlight the performances of big companies that are doing business in the
mining industry. Moreover, the concept of the elasticity regarding the mining industry will
also be highlighted by the study.
Introduction to the company
BHP BILLITON is having market capital of around $138.3 billion. Currently the
company is employing around 60,644 employees and the company is selling products around
$42.6 billion (Forbes, 2019). The company is mainly dealing with diversified mining
industries and the main function of the company is lying within the category of exploration,
development, production and processing of minerals, gas and oils. The company is operating
in the segments of minerals like Petroleum, Potash, Copper, Iron-ore and Coal. In 2019, the
profit of BHP BILLITON has faced down fall in the level of the profit in the year 2019,
compared to level of profitability that was in 2018. In the first half of 2019, the level of profit
for the company fell to around $5.66 billion and in the year 2018, the level of profit was

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around $4.4 billion. The profit fell down to 8%. The total revenue of the company was flat
and the company made a loss of $300 million loss after it sold the oil and gas business to
mining giant BP for $10.4 billion (ABC News, 2019) The company witnessed loss in their
cost of production of US$835 million in December due to unplanned production outrage that
took place in Olympic Dam facility in South Australia. The Iron ore was the biggest revenue
earner for the company and the amount of revenue that was earned through iron ore is around
AUD 8.2 billion. The net debt of the company fell to about US$9.9 billion and the selling of
oil and gas products in US helped lot (ABC News, 2019).
Industry background
The period of 2005 to early 2013 was the booming period for the Australian mining
industry. During this phase of time, many new projects and heavy investments took place in
the Australian mining industry. During this point of time the focus of the industry was mainly
on the development of the construction industry and many heavy projects on construction
was done within the economy. Moreover, since 2013, the focus of the government shifted
towards production and export of the mining products. The government invested to around
USD 370 million in order to develop several lithium mines in WA in the last few years. In
Australia, the cost of labour are very high and this is the main reason the demand for
automation machineries in the field of drilling, excavation is increasing. The mining industry
of Australia having huge potentiality in future as the discovery of the nickel mines will
increase the development of battery industry. Due to increased amount of decarbonisation
and electrification of transports are increasing the demand for nickel and other associated
minerals. In the year 2017, the employment in the mining industry is around 216.5 and the
total level of employment is 12,420.6 number of people were employed (Hosie, 2018). The
contribution of Australian mining is around AUD 36287.00 million. The Australian economy
has achieved growth of 2.8% and the valuation of the Australian economy was around $1.8

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trillion in 2017-18 and during the same year the Australian mining industry witnessed growth
of around 2.9% (Hosie, 2018).
The market structure of the industry
The market structure of the industry is claimed to be as oligopolistic competition in
nature. The main characteristics of the industry is that all the suppliers in the industry is
selling products based on different minerals. The companies that are dealing with various
mining industries and they are dealing with various minerals. The industry is having many
sellers and very few buyers. On the other hand, through the development of market of
Australian mining industry is having huge range of minerals and the development of industry
is growing based on the demand of the associated industries (BHP Group Limited, 2019).
Three important factors has been identified as the factors that are helping in the development
of the mining industry are substantial and stable increase in the price of metal in the global
market, the cost of new coal mines are giving energy at a low cost and the final factor is
improved technology that is increasing the level of efficiency.
Some of the big players within the mining industry are Barrick Australia Pacific, Rio
Tinto, BHP Billiton, Fortescue Metals Group, Arrium Mining and Materials, Gold Fields
Limited.
MMG limited
Evolution mining limited
Mineral resources limited
Whitehaven coal limited
Iluka resource limited
0 500 1000 1500 2000 2500 3000
Revenue growth of companies
Figure 1: Revenue growth of Companies in Australia

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(Source: Applied.org.au, 2019)
Figure 2: Kinked demand curve in oligopolistic competition
(Source: Created by author)
Due to prevalence of the oligopolistic competition the group behaviour will be
playing a crucial role as the firms will follow one firm if the price is cut but if the price of the
product is increased then the companies will not follow. BHP will not reduce the price of
their products below MC, and in order to survive in the market and improve their position
they will try to deliver best quality of products in a low price.
ONE DAY 5 DAY'S 30 DAY'S 90 DAY'S YTD
-50
-40
-30
-20
-10
0
10
20
Comaprison of performances by companies
Almaden Minerals Ltd Agnico Eagle Mines Ltd
Bhp Group Ltd Coeur Mining, Inc.
Sprott Physical Gold & Silver Trust
Figure 3: Comparison of performances of companies

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(Source: Csimarket.com, 2019)
The MMG limited has increased the revenue growth among the mining industry in
Australia, and it is followed by the Evolution mining limited. The growth of the companies
are increasing the development of resources distribution and channelization will
automatically increase the development of better accessibility. The mining industry in
Australia are having huge level of potentiality for the future that is increasing the
development of resources. Moreover, the industry is being vast and the market pattern is open
and is operating at the free entry and exit of the firms.
Factors that influence demand for the company’s product(s)
The study on the mining industry has helped in highlighting the factors that are
mainly increasing the demand of the products built by the mining industry of Australia. Two
important factors that can be highlighted are power plant design dependency and the end user
mine equity (Forbes, 2019). The impact of these two factors are significant in the sense that
expansion of international mineral market is actually helping the demand of Australian
minerals like coals, gold and iron ore. Mostly the Asian countries in the form of Japan,
Singapore are continuously demanding the Australian gold and iron ores. The steady demand
from the international market is actually increasing the demand of minerals (Jagodzinski et al.
2018). On the other hand, the existence of stable prices in the international market is
increasing the demand function of the global economy and the company is doing profit as it is
dealing.
The second factor is end user mine equality. It is important to utilise the resource
development among the stakeholders to participate equally regarding the mining of the
industry. This will automatically help the development of the mining production and
associated infrastructures (Kujala et al. 2015). Through the improvisation of the equality in

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participation, it will help the economy to get better access to high level of the production that
will definitely increase the rate of the GDP of mining industry.
Factors that influence supply of the company’s product(s)
In the recent years, the Chinese economy has faced deep crisis in the export and
import of the minerals in the international markets, and that has led to the development of
Australian mining products supply. Till date the Australian mining industry has witnessed
positive factors that has easily affected the supply of minerals but for the past few years, the
continent witnessed some of negative factors that has indulged the supply in negative terms
(Lacey et al. 2019). Huge generation gap and lack of proper level of investments from the
government for the mining industry is making the scenario worse. Generation gap is having
impact on the supply of the minerals in the negative way as more young and talented
employees are leaving out of the country and getting settled in other country.
Figure 4: Decrease in Supply due to generation gap
(Source: Created by Author)
On the other hand, the lack of investment from the government is also decreasing the
overall supply of the minerals. The supply curve in the long run will shift in the leftward

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directions signifying the reduction in the quantity supplied within the economy. The
producers will not be able to increase the supply as the economy will be in deep circle of
investment trap that is increasing the cost of production for the mining industry. In the recent
years, the supply of minerals decreased and supply of the coal industry in the NSW fell to
about 245.7 million tons in the year 2017. Raw production of coal in the Hunter coalfield has
increased by 13.6 million tons (Coal Services, 2019).
Elasticity
Figure 5: Mining commodity price index
(Source: Espace.curtin.edu.au, 2019)
The price index of mining industry is showing inelastic in nature. On the other hand,
through the use of better development of technologies the mining industry of Australia are
looking to indulge the development of mining industry so that economy can perform better in
the long run. Moreover, through the development of resource utilisation and channelization of
resources, the mining industry will definitely looking to increase their exports to Taiwan,
Japan and other countries (McLennan et al. 2017). However, the economy of Australian

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mining will definitely increase the development of better technologies in the form of use of
IOT. This use of IOT is making the products that are being built by BHP Billiton highly
elastic in nature and the company is exporting to the countries that are having high terms of
trade. This is important in the sense that through the development in the economic
performances, the country is having high growth of development especially in the exports of
products related with gold and iron ore. The mining commodity price index is growing from
the year 2008-09 till 2011-12. This is mainly due to the global financial crisis and the overall
demand from the international market.
Impacts of an event on the industry/company
One of the recent event that took place in Australia is Industrial conglomerate GFG in
New South Wales in the year 2017 that has claimed that Australian economy and mining
industry are having huge growth. The Australian Copper industry is having potentiality of
AS$100 million fresh investment and the company like Havilah Resources will invest heavily
in the Iron and Steel industry of Australia (MINING.com, 2019). The company is eying the
development of the Australian mining industry that will not only increase the level of the
employment level but will also increase the development of scope for resources
channelization. On the other hand, the growth and development of steel industry will
definitely increase the economic reach of the economy. This is important in the sense that
through the development of better resource and better infrastructure the company will be able
to increase the valuation of shares. Moreover, through the improvement in the development
of resources will allow the economy to invite new technologies and new companies building
products based on iron and steel. Through the increase in the development of resources, the
economy will aim more in developing the production rate that will allow the BHP Billiton to
grow in the international level.

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Conclusion
The whole study has concluded that in order to increase the level of the efficiency in
the mining industry the economy of Australia is having significant role. The company BHP
Billiton is aiming to increase the resource development through the use of modern tools and
technology that is going to increase the resources allocation of the economy. Moreover,
through the development of economic activities, the company is indulging more amount of
investment in the nickel and Iron ore industry. Through the development of better tools and
technology is mainly looking to increase the development of better improvement in the level
of economy.

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Reference list
(2019). Espace.curtin.edu.au. Retrieved 3 May 2019, from
https://espace.curtin.edu.au/bitstream/handle/20.500.11937/41561/199178_199178.pdf?
sequence=2
Applied.org.au. (2019). [online] Available at:
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minerals.pdf [Accessed 21 May 2019].
Australia - Mining | export.gov. (2019). Export.gov. Retrieved 2 May (2019), from
https://www.export.gov/article?id=Australia-Mining
Australia, M. (2018). Mining boom delivers record resource export revenues for Australia
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http://www.mining.com/web/mining-boom-delivers-record-resource-export-revenues-
australia/
BHP Group Limited . (2019). Ibisworld.com.au. Retrieved 2 May (2019), from
https://www.ibisworld.com.au/australian-company-research-reports/mining/bhp-group-
limited-company.html
BHP's half-year profit drops 8 per cent to $5.66b. (2019). ABC News. Retrieved 21 May
2019, from https://www.abc.net.au/news/2019-02-19/bhp-financial-results-profits-drop/
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Calvo, G., Mudd, G., Valero, A. and Valero, A., 2016. Decreasing ore grades in global
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Csimarket.com. (2019). Metal Mining Industry Stock Performance, Stock Quotes -
CSIMarket. [online] Available at: https://csimarket.com/Industry/Industry_Performance.php?
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Export.gov. (2019). Australia - Mining | export.gov. [online] Available at:
https://www.export.gov/article?id=Australia-Mining [Accessed 21 May 2019].
Forbes. (2019). BHP Group on the Forbes Global 2000 List. [online] Available at:
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Hosie, E. (2018). Mining's value to Australia hits new heights - Australian Mining. [online]
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contributes-8-8-annual-australian-gross/ [Accessed 21 May 2019].
Jagodzinski, E.A., Bodorkos, S. and Crowley, J.L., 2018. U–Pb geochronology of the eastern
Coompana Province, South Australia. In Coompana Drilling and Geochemistry Workshop
2018 extended abstracts. Department for Energy and Mining, South Australia (pp. 66-75).
Kujala, H., Whitehead, A.L., Morris, W.K. and Wintle, B.A., 2015. Towards strategic
offsetting of biodiversity loss using spatial prioritization concepts and tools: A case study on
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Lacey, J., Malakar, Y., McCrea, R. and Moffat, K., 2019. Public perceptions of established
and emerging mining technologies in Australia. Resources Policy, 62, pp.125-135.
McLennan, C.L.J., Becken, S. and Moyle, B.D., 2017. Framing in a contested space: media
reporting on tourism and mining in Australia. Current Issues in Tourism, 20(9), pp.960-980.
Tan, L., 2017. Western Australia. Redback Publishing.

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Zhang, A. and Moffat, K., 2015. A balancing act: The role of benefits, impacts and
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