Impact Of Net Income Changes On Equity In BHP And Whitehaven Mining Companies

Feasibility of the project within time-frame

The annual report is a comprehensive study which is intended to provide information for shareholder and various other interested people. This includes activities of companies and performance of finance across the preceding year.

Here, to derive the data, the annual report of BHP Mining and White Heaven Mining Company is understood. The following proposal demonstrates a short literature review. Then various research aims are discussed with one research question. Further, a research plan is included with an analysis of the suggested method of data analysis and data collection.

For evaluating the economic feasibility of investment project, relates measurements and various important criteria is to be specified. These evaluation methods are to be categorized in five primary categories. This include net present value processes, return rate process, methods of ratio and payback methods. Here, the financial feasibility is helpful to be measured on the basis of accounting profits retrieved from annual reports of BHP and White Haven Mining Company. These are the activities of business is not available for different prospective projects. However. The projections of statements is used to gain effective understanding the finances of projects. These flow of cashes of financial statements of projects are the records of real economic activities of different entities of business. This it is nor available for prospective projects.

                                               

                                                                                    Figure 1: “Process of Project Feasibility”

                                                                                      (Source: Harrison & Lock, 2017)

Hence, through analyzing the costs and revenue of entity, the statements are to be projected and examined for gaining smart understanding of the entity’ performance. Here, the understanding of investing in unproven or new investment project must nevertheless be based solely over the results of the analysis. Further, decision of making financing the project is highly vital for managerial decision. Additionally, the project finance to method to finance the economically capable projects. This is on the basis of intended cash flows created by the projects. The flow of cash of the project is be segregated from sponsoring organizations as the project is a distinct entity. In this case project financing is helpful to provide particular benefits on conventional financing like sharing risks and reduction of agency costs of their debt. This must also include the cost of debt and free flow of cash and expanding the debt capacity of sponsors.

                                                                         

Discussion on aims and objectives and research questions

                                                                                 Figure 2: “Feasibility Study of Project”

                                                                                            (Source: Myers, 2016)

The proposal intends to analyze different share of profit and loss of associated and different joint ventures. They are accounted for using the method of equity. This is to be presented in distinct line item over the face of that statement. Further, it is needed to identify how standard and regulators settlers have specific jurisdictions that have been recommending and accepting the share of loss and profit of equity methods investees. They are intended to be presented concerning whether those activities of investees.  They are also related nearly with that reporting entity. This has also needed to understand that the share of loss and profit of equity method investees are presented as one lone line item. It has been causing. Here, every intragroup liabilities and asset, an income of equity and various cash flows are to be analyzed (Hutchinson, Seamer & Chapple, 2015). As there is any modification on ownership of a subsidiary, there is a need of disclosure that is needed to be understood for the schedules. This must highlight the impacts of the equity of changes to the ownership in that subsidiary that has not resulted in any loss of control.

The various research questions to be identified are discussed below:

• What is the effect on equity because of net income over mining industries?
• How can the net income over various mining industries be determined?
• What are the values of shares that are issued by BHP and White Haven Mining Company?

BHP Billiton Limited has been delivering the return on investment of about 13% since the previous year. This has been in-line with the average of 10% at a similar period.  For instance, , Penrose (2017) mentions that let BHP has invested about 1 Australian dollars equity, this would create about 0.1 dollars in earnings from that. The investors who have been diversifying the portfolio on the basis on the industry has needed to maximize the return over diversified mining sectors. This must be done by choosing the greatest returning stocks. This has been deceiving as the organization consisted of a variation of costs of dent levels and equity. This has been pushed up exaggeratedly ROE. This has been at the same time since accumulating the expense of high interest as shown by Chen (2016). 

                                                                     

                                                                                   Figure 3: “Various productions of BHP in FY18”

Preliminary critical literature review

                                                                                                                (Source: BHP, 2018)

Here, ROE is measured against the cost of equity for determining the deployed equity capital of BHP Billiton. Their value of equity is examined to be about 11%. Provided with the discrepancy of -0.0078% taking place between cost and return, Rees, Smith and Hall (2016) has shown that BHP Billiton has been paying extra for the capital that what it has provided in return, Further, ROE is broken down to various ratios like financial leverage, asset turnover and net profit margin.

                                                                 

                                                                          Figure 4: “Strong financial performance achieved by BHP in FY18”

                                                                                                           (Source: BHP, 2018)

Schneider, Michelon and Maier (2017) mentions that in the previous financial year, the Whitehaven has generated a maiden profit of 20.5 million dollars. This can be seen as a great development in the loss of 342 million dollars. The net debt is down from 936 million dollars to 859 million dollars. The cash per tonne has been decreased by 8% to 56 dollars. Moreover, Freebairn (2015) the organization has gathered an average of 70 dollars per tonne in that year. This is because of lesser coal prices. However, the production cost of Whitehaven has fallen by 5 dollars.

                                                 

                                                                Figure 5: “First Group of Operational Highlights of Whitehaven”

                                                                                (Source: Whitehaven Coal Newsroom, 2018)

Downes, Hanslow and Tulip (2014) has shown that it has been two years that Whitehaven has returned their profit. Moreover, Black, Chapman and Windsor (2017) argues that it was reported that 205 million dollars of net income were done in 2016. On the other hand, the net debt has been 859 million dollars. They have a 15% through the cycle gearing target. They have a current 1 billion-odd dollars debt facility that could be drawn on. In this situation, the miner understood to be staring at the latest package of debt. They have consisted of a bunch of lending banks. They are involved as an effective element of Rio Tinto process.

                                                       

                                                              Figure 6: “Second Group of Operational Highlights of Whitehaven”

                                                                                  (Source: Whitehaven Coal Newsroom, 2018)

The steps of reviewing annual reports for Whitehaven and BHP Mining is illustrated below.

                                               

                                                                      Figure 7: “Steps to review the current annual reports”

                                                                                    (Source: Grayson & Hodges, 2017)

The data for the project is retrieved from Whitehaven and BHP Mining company’s annual reports. For this last ten years are considered. For BHP is seen that capital discipline, solid prices and strong operating prices in the financial year 2018 has resulted on 33% increase in the underpinning attributable profit. The amount is 8.9 billion U.S. Dollars. This has enabled to declare a variable dividend of 6.3 billion U.S. Dollars for the year (O’Faircheallaigh, 2015). They have focused restlessly on productivity and security that has released extra volumes around the supply chain. This has 8% growth of volume for that year.

                                             

                                                                         Figure 8: “Analyzing the overall financial contribution of BHP”

                                                                                                      (Source: BHP, 2018)

Moreover, they have developed a free cash flow of about 12 billion U.S. dollars. They have invested about 6.8 billion dollars back in the business with decrease net debt by U 5 billion dollars. Besides, they have secured clean, all-cash and quick exit from that shale. This has been the assimilated consideration of 10.8 U.S. dollars billion payable in cash. As the transactions are finished, they expected to return the overall proceeds to the shareholders (Hutchinson, Seamer & Chapple, 2015).

                                                     

                                                                            Figure 9: “Reconciliation of taxes paid  to tax expenses”

                                                                                                       (Source: BHP, 2018)

Thus, BHP’s strategy of operating and owning various long-life assets indicated that they had been needed to plan and think in decades. They can develop long-term values as they can secure and sustain their operations with the support of communities where they work. To perform that, they should be maintaining and forming respectful, authentic and deep relationships with every stakeholder (Dixon & Nassios, 2016).

                                                     

                                                                        Figure 10: “Total Financial contribution of BHP for the year 2018”

                                                                                                         (Source: BHP, 2018)

On the other hand, Whitehaven Coal has turned into a single non-government employer in their nation. Since the last decades, they have comprised of the workforce of about 1600 people who are employed at around six mines. It is seen from the past five years they have invested about 1.5 billion dollars in the economy of NSW or North West (Gitman, Juchau & Flanagan, 2015). Their large quality coal has been exported to the emerging and established markets around Asia. There have used that to develop steel and electricity.

                                               

                                                                              Figure 11: “Five Year Financial record of Whitehaven”

                                                                                        (Source: Whitehaven Coal Newsroom, 2018)

 They have been delivering important building blocks for different sustainable financial development within the present carbon-conscious world. Irrespective of the local communities where they have been investing or operating or developing and advanced economies where the product is put to perform, they are proud of powering the sector (Freebairn, 2016). This is through developing value for every shareholder, irrespective of size. It is seen in June 2018 they have about 1026045885 shares of various issues.

                                           

                                                                                  Figure 12: “Organizing project management activities”

                                                                                      (Source: Whitehaven Coal Newsroom, 2018)

Here quantitative data analysis is to be done. This is helpful to change the raw data into meaningful information. This is to be done through critical and rational thinking. This includes the measurement of frequencies of different variable and differences taking place between the variables. This is related with findings of evidence to reject or support hypothesis that is formulated in the early stages of the research process. This belongs to the experimental and social realm instead of mathematical data. Here the competitive advantages and business model are the primary components of the analysis. The plan includes the following:

                                                                     

                                                             Figure 13: “The ways in which data retrieved from the annual reports are useful”

                                                                                          (Source: Created by Author)

Here web analytics must be implemented. It is the analysis, reporting and collection of website data. Here, the focus is to determine the calculations on the basis of the user an organizational goals. The using of BHP and Whiteheaven’s data for finding the failure and success of the aims and drive strategy and develop the experience of users. Here, variable tools like Chartbeat, Woopra and Google Analytics can be used. Here, the approach towards web analytics must be learnt to understand the annual reports for 2012-2018 better. This is helpful to get the most effective position in optimizing the website and thus develop the user’s experience as they visit. Thus it is vital to understand what the users have needed to say in words and allow to share the experience in simple and accessible way.

Here, it must be reminded that proper insights must be chosen that are relevant. Proper insights trigger actions to create success and ways of defining success. Some of the steps to be focused are discussed below. The first step is targeting. Here, the most vital goals and most significant Web visitors are to be targeted. The web traffic data is to be analyzed for uncovering what has been happening on the web site. The gaps must be identified are to be identified. Next, these gaps are to be defined, and a plan is to be mapped to close the gap and calculate the overall progress. Further, the execution of the plan must be done and the success is to be gauged through Web analytics. Then the process of refining must be done through setting new goals.

This analysis has included finding of the likelihood of dollar volumes of purchase that is made by distinct customers and specific group of customers from 2012 to 2018. Besides it helpful to determine the geographic sectors from where most and minimum amount of purchasing is done. It is helpful to predict what elements are most and least likely to be bought in future.

Task Name	Duration	Start	Finish	Predecessors
Analyzing the annual report of BHP and Whitehaven	195 days	Wed 8/29/18	Tue 5/28/19
Analyzing Corporate information	6 wks	Wed 8/29/18	Tue 10/9/18
Analyzing products overview and financial highlights for the past decade	4 wks	Wed 10/10/18	Tue 11/6/18	2
Understanding MDA or Management discussion and analysis	4 wks	Wed 11/7/18	Tue 12/4/18	3
Assessing report on corporate governance	7 wks	Wed 12/5/18	Tue 1/22/19	4
Understanding information on shares of the company	4 wks	Wed 1/23/19	Tue 2/19/19	5
Predicting optimum control factor levels with performances	5 wks	Wed 2/20/19	Tue 3/26/19	6
Determining auditors report	2 wks	Wed 3/27/19	Tue 4/9/19	7
Understanding financial statements	2 wks	Wed 4/10/19	Tue 4/23/19	8
Preforming data analysis and notes to accounts	5 wks	Wed 4/24/19	Tue 5/28/19	9

                                                   

                                                                               Figure 14: Gantt Chart for the present proposal”

                                                                                             (Source: Created by Author)

• The site of Whitehaven Coal is used here, that determines the power generated by various in multiple years: https://www.whitehavencoal.com.au/
• The site of BHP is utilized here, that highlights how they have been working with complete integrity: https://www.bhp.com/our-approach/operating-with-integrity

The above proposal shows how long-term value for the shareholders is created by BHP. All of these are done through marketing, development, acquisition and discoveries of natural resources. On the other hand, since last decades Whitehaven Coal has turned into one of the biggest and popular independent coal producer at North West New South Wales. The study has highlighted how equity has been affecting the firms because of the changes in their net income. Thus it is helpful to understand the methods to increase the capital across the sale of shared for the mining companies. Moreover, the study is useful to know how essentially the deal of ownership interest is significant to increase the funds for business.

References:

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BHP. (2018). Annual Report 2018. [Web Log Post] Bhp. Retrieved from Https://www.bhp.com/investor-centre/annual-report-2018.

Black, S., Chapman, B., & Windsor, C. (2017). Australian Capital Flows. RBA Bulletin, June, 23-34.

Chen, S. (2016). Detection of fraudulent financial statements using the hybrid data mining approach. SpringerPlus, 5(1), 89.

Dixon, J. M., & Nassios, J. (2016). Modelling the impacts of a cut to company tax in Australia. Centre for Policy Studies, Victoria University.

Downes, P. M., Hanslow, K., & Tulip, P. (2014). The effect of the mining boom on the Australian economy.

Freebairn, J. (2015). Mining booms and the exchange rate. Australian Journal of Agricultural and Resource Economics, 59(4), 533-548.

Gitman, L. J., Juchau, R., & Flanagan, J. (2015). Principles of managerial finance. Pearson Higher Education AU.

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Lucas, A. (2016). Stranded assets, externalities and carbon risk in the Australian coal industry: The case for contraction in a carbon-constrained world. Energy Research & Social Science, 11, 53-66.

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O’Faircheallaigh, C. (2015). Social equity and large mining projects: Voluntary industry initiatives, public regulation and community development agreements. Journal of business ethics, 132(1), 91-103.

Otto, J. M. (2017). The taxation of extractive industries: Mining (No. 2017/75). WIDER Working Paper.

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Penrose, E. T. (2017). Foreign Investment and the Growth of the Firm 1. In International Business (pp. 33-48). Routledge.

Rees, D. M., Smith, P., & Hall, J. (2016). A Multi?sector Model of the Australian Economy. Economic Record, 92(298), 374-408.

Schneider, T., Michelon, G., & Maier, M. (2017). Environmental liabilities and diversity in practice under international financial reporting standards. Accounting, Auditing & Accountability Journal, 30(2), 378-403.

Whitehaven Coal Newsroom. (2018). Annual Reports. [Web Log Post] Whitehaven coal. Retrieved from Http://www.whitehavencoal.com.au/annual-reports/.

Xu, W., Davidson, R. A., & Cheong, C. S. (2017). Converting financial statements: operating to capitalised leases. Pacific Accounting Review, 29(1), 34-54.