BHP BHP Group Limited

By Alex MacDonald and Scott Patterson 

LONDON--Mining giant BHP Billiton Ltd. plans to forge ahead with investments to boost production, particularly in copper and energy, despite a continuing rout in commodities prices.

In a presentation to investors Tuesday, BHP Chief Executive Andrew Mackenzie outlined a plan to lift its current production by more than 10% by investing in existing operations. He said the development will cost less than $1.5 billion over a five-year period.

BHP's assets "have such high returns that they work even at these very low prices," Mr. Mackenzie said in an interview following the presentation.

He said the company's plans are primarily focused on expanding its own mines and wells, not on acquisitions. "You can't be focused on acquisitions because you're dependent on so many other things," said Mr. Mackenzie.

Shares of BHP, down 44% in the past year, closed up 2.1% in London, Tuesday.

Mr. Mackenzie in his speech said the miner's investments should earn average returns of about 60% based on current analyst forecasts of commodity prices.

He said BHP also plans to make investment decisions on at least two big projects, one in copper and one in oil, within 18 months. He expects capital expenditure to pick up next year.

Big mining companies like BHP have been hammered by a protracted slump in commodity prices stemming from slower-than-expected global growth and slackening demand in China, the world's largest consumer of many commodities. Prices for some commodities, like oil, have picked up in recent weeks, though some analysts have said prices could fall again if Chinese growth remains disappointing.

Under Mr. Mackenzie's three-year stewardship, BHP has focused on cutting costs, shedding assets and delaying big investments. Despite those moves, Moody's Investors Service and Standard & Poor's Ratings Services both recently cut credit ratings on the company to A3 and single-A, respectively.

Earlier this year, BHP slashed its dividend by 74%, abandoning its yearslong pledge to keep its annual payout steady or rising, as it announced a $5.7 billion loss for the six months through December.

The company's challenges go beyond the tough market. In November, an iron-ore tailings dam at a BHP joint venture in Brazil burst, killing 19 people and polluting more than 400 miles of river. Last week Brazilian federal prosecutors filed a lawsuit that could force BHP and its joint venture partner Vale SA to pay up to $44 billion for cleanup and fixing environmental damage.

Mr. Mackenzie said in the interview that the company believes a settlement reached in March, in which it agreed to spend as little as 9.46 billion reals -- about $2.7 billion -- through 2030, was the best solution since it will get cash to the communities quicker. "We believe that is the fair way forward," he said.

Write to Alex MacDonald at alex.macdonald@wsj.com and Scott Patterson at scott.patterson@wsj.com

(END) Dow Jones Newswires

May 10, 2016 11:54 ET (15:54 GMT)

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