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Tickers in this Article: BHP, RTP, AAUK
While the demand for oil has dominated the news, natural resource mining company BHP Billiton's (BHP) broad mix of business groups including carbon steel, petroleum, base materials (copper), aluminum, stainless steel, coal and diamonds has led to record setting profits. BHP Billiton is an Australian based global resource provider who generated $6 billion in profits in 2005 on $29 billion in revenues. BHP Billiton, who employs 36,000 in 25 countries, saw its stock prices climb 47% in 2005 and is currently trading in the $35 range.



BHP Billiton 2005 profit leader divisions Carbon Steel Materials, Base Materials (Copper, Silver, Lead) and Petroleum all benefited from rising commodities prices during the year. Steel, the backbone of construction and automobile manufacturing is expected to experience increased demand by 4%-5% globally and by 7% for Central and South America, the Middle East and Asia Pacific regions according to the International Iron & Steel Institute. During Hurricane Katrina oil prices surged to $70 dollar a barrel and although prices have pulled back, global demand is still continuing an upward trend. Copper, which is being relied upon heavily by China's energy providers is also being used to develop telephone networks, plumbing and road systems. There is a debate about whether or not the rising prices of copper, currently $2.27lb, will lead to over-production and falling prices. The overall concern here is that the commodities market is headed for a cyclical decline. BHP Billiton Chairman, Don Argus, points out that while demand in China is stabilizing other emerging countries in South America, Africa and Russia will continue to drive demand.


To meet that demand in the top three profit areas, BHP Billiton taken proactive steps. BHP Billiton has forged a collaboration agreement with Shanghai's Baosteel Group, a large iron and steel conglomerate, to exchange technical expertise and best practices. The ultimate goal for BHP Billiton is to establish a commercial resource agreement with Baosteel in order to benefit for China's world leading demand and use of steel. BHP Billiton kicked off six major oil projects last year including drilling in the Gulf of Mexico to increase its oil production capabilities. BHP also acquired WMC Resources last year to bolster its' copper and nickel businesses.

BHP Billiton was also the first extraction industry company to win the United Kingdom award for Corporate Social Responsibility. BHP has a tremendous focus on and recognizes Sustainable Development, which involves elevating environmental and social, as a key factor towards successful business operations.



Other major players in the business of mining the worlds resources include London-based Rio Tinto Plc (RTP) and Anglo American (AAUK). Rio Tinto and Anglo America have also benefited from the rise in commodities prices over the past few years. Rio Tinto reported record net profits of $5.5 billion while Anglo also reported record net profits of $3.52 billion in 2005. Anglo American has a present expansion plan to increase production for platinum, diamonds, coal, iron ore and base metals in the near term. Rio Tinto is seeing strong demand and economic activity from Japan where sales of iron ore, coal and base metals are currently outpacing its sales to China. Rio Tinto is also entering into a joint venture with a Russian mining company to explore Siberia for resources.

While commodities are a cyclical business companies that can maintain productivity improvements and manage costs will come out ahead. Based on the positive outlook of current forecast for steel, petroleum, copper investors must take the time to investigate commodities as an avenue for portfolio diversification. As the world continues to grow BHP Billiton, Rio Tinto Plc and Anglo American will continue to gain more attention.

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