Benefits of Billiton Limited's Demerger Plans - Case Study Example

Student Name: Student Number: Student’s Email Address: Tutor’s Name: Tutorial Day and Time: Name of Company: BHP Billiton Title: Semester/ Campus Details: Introduction to BHO Billiton BHP Billiton which is an international natural resource company was founded in 2001 through a merge between Billiton PLC and BHP Ltd. Its headquarters are located in Melbourne, Australia. The company is among the world biggest mining companies and it deals with production of copper, silver, steel, iron, aluminum, gas and oil. BHP Billiton also shows interest in transport and engineering. In Aug 13, 1885, BHP Ltd got registered as Broken Hill Proprietary Company limited in Victoria. The name originated from Broken Hill city which was along a range of New South Wales. In 1883 this area was found to have a rich lead, silver and zinc lode. The company had the richest silver mine in the world in the late 1880’s and 1890’s. BHP started drilling oil in 1964 even though its search for petroleum and gas had begun in 1954. It changed its name to BHP Limited in 2000. The company announced its plans to merge with Billiton PLC in 2001. Billiton PLC is British company. It got started in 1860 with main reason being to mine tin on Billiton Islands located I Indonesia. It also had interests in mining aluminum, steel and nickel. At the time of the merger, BHP Billiton had operations in 20 countries worldwide[Edi15]. BHP Billiton contributions to community development BHP Billiton believes that education is key contributor to community development. It reduces poverty by increasing access to employment and business opportunities. Within its host communities, BHP Billiton provides several approaches to education provision which improve its quality and relevance. They provide education services such as parenting programs and early childhood education. Secondly, scholarships to students who are joining secondary and tertiary institutions. Thirdly, they provide educational services and facilities to those people who live in remote and rural areas. Lastly, the company provides on-the-job training and also gives numeric training to workers who are from the host community[bhp15]. On 27th Jan 2015, the company committed $ 10 million to be used in developing a BHP Billiton water park. It is to be built at Perth’s riverfront Elizabeth Quay development which is a free community space. Elizabeth Quay is going to be a land mark that will open up riverfront for more people to enjoy. The water park will provide people with family setting outdoor space where they can meet and socialize freely for several years to come. Its seating will be amphitheater like to reflect on the history of Riverside drive. The park can also be used to hold flexible events and it can hold up to 800 people without water. The main aim of the project was to give back to the Western Australia community for the support they have given the company for the past four years. This program has been made a reality through BHP Billiton’s community development program. The program has contributed over $ 175 million for the last 5 years. The money has been used to provide health, education, community infrastructure and indigenous development in Western Australia[BHP15]. BHP Billiton’s activities negative effects on the environment BHP Billiton through its mining activities has negatively affected the environment in three perspectives. These perspectives include globalization, ecology and economics. Effects on ecology. In Papua New Guinea, waste from the mines was being dumped in the river. Over 80,000 tons of waste containing traces of zinc, copper, lead and cadmium were being dumped in the river for two decades. Clean water is very important in maintaining ecological balance. The waste which was being dumped in OK Tedi and Fly rivers damaged over 2000 square kilometers of forest and it also killed fish stocks in the rivers. Moreover, these mines poses threat of acid rock drainage. When this acidic water from the mines gets into the river system, it lowers the rivers PH levels. As a result, plants in and along the river are destroyed and fish stocks in the river are depleted[Skw15]. Even though mining exports from BHP Billiton Company have been a major boost to concerned countries’ economies, it has also had negative effects. Mining activities have left many subsistence farmers unemployed. This has led to the depletion of food supply in many regions. Food shortage leads to many other forms of hardships which are social effects. These effects leads to economic damage due to poverty cycle. Positive and negative impacts of BHP Billiton actions on host community members Positive impacts BHP Billiton provides employment and training opportunities to members of the host community which improves their living standards. The company also helps community members strengthen their businesses by helping them to diversify their products and services. It also helps them identify and tap into new markets to sell their products[Wer01]. The company has been promoting improved health in all the regions it has mining sites. It has been doing so by supporting maternal health and promoting nutrition programs. Moreover, it provides portable water, improves hygiene practice and sanitation facilities so as to protect the community from diseases[bhp151]. BHP Billiton has positive impact on the education of the communities around its mines. It gives scholarships to students joining secondary and tertiary levels from the host communities. This is to increase level of employability of community members[bhp151]. It also has had great impact act on the governance of the involved communities. It has done so by supporting programs that improve government capacity to increase transparency and accountability which makes their operations more effective[bhp151]. Negative impacts BHP Billiton dumps its wastes from the mines into the rivers. This wastes contains traces of copper, lead and zinc. When these wastes gets into the water they negatively affect rivers ecosystem. This depletes fish in the rivers and affects plants in and along the river. Depleting fish in the rivers lower the living standards of communities who depend on fishing as their source of income. Moreover, the wastes from the mines contaminates water in the rivers making it unsafe for human consumption. This forces community members to spend a lot of money and time to obtain clean water for their usage. In addition, dust emitted from the mining sites affects respiratory systems of the surrounding community members. Positive and negative impacts of BHP Billiton actions on it employees Positive impacts BHP Billing provides it workers with on-job-training opportunity which allows their workers to gain more experience and grow as professionals[wor15]. The company also motivates is workers by rewarding those who perform well in their jobs. It also offers health insurance and retirement benefits. The company also provides its mine workers with god supervisors and health safety workers in case of an emergency. Negative impacts Workers at BHP Billiton mines are subject to poor working conditions which do not match the profits earned by the company. This poor working conditions risks their health conditions. Also salaries are not fairly distributed. Some contractors are paid more than others. Moreover, workers at BHP Billiton feel that their jobs are not secure that is they can easily be fired. In addition, those workers who are at 12 hour shift are not give adequate breaks. This is exploiting employees[Pet12]. Positive and negative impacts of BHP Billiton actions on its shareholders Positive impacts With the demerger between BHP Billiton and south32 IS, the shareholders will receive several benefits from the operation. The management will make the company more productive which will unlock shareholders values. It will also provide increase in cash flow which will lead to more returns for the shareholders. The management will focus on operations which are capable of generating higher returns. The demerger will make opportunities that were not supported by the board be favored by the new board. Managers invest shareholders money into activities that will have sustainable returns for a long period of time[Mar14]. Negative impacts In case of demerger, taking up shares in the new entity may expose shareholders to more volatile commodities. When a demerger takes place, the board will have to seek approval from the government and adopt new regulations. This will have to take place before it can get approval from the board in case of a new investment opportunity[Mar14]. Conclusion The responsibilities that BHP shows to community development are to be commended. The idea of promoting education among members of host community real helps to build the profile of the company. This shows that the company is not only concerned with making profits but also improving the living standards of its stakeholders. BHP Billiton limited needs to regulate its negative impacts on the environment. It should eliminate any traces of copper, zinc and lead before dumping it waste into the river to avoid affecting its ecosystem. By polluting the environment it builds a bad reputation for its self. The company also needs to review it employee working conditions. It is supposed to make their working conditions humane and strengthen their job security in order to avoid unnecessary strikes. References Edi15: , (Britannica 2015), bhp15: , (bhpbilliton 2015), BHP15: , (bhpbilliton.com 2015), Skw15: , (Skwirk 2015), Wer01: , (Werther Jr 201), bhp151: , (bhpbilliton. 2015), wor15: , (Indeed.com 2015), Pet12: , (Berry 2012), Mar14: , (Woodruf 2014), Read More