BHP to Forge Ahead With Investments
May 10 2016 - 10:30AM
Dow Jones News
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 on Tuesday, BHP outlined a plan
to boost its current production by more than 10%, by investing in
existing operations. It said the development will cost less than
$1.5 billion over a five-year period. Investments are forecast to
earn average returns of about 60% based on current analyst
consensus price forecasts.
"We are not waiting for prices to recover," BHP Chief Executive
Andrew Mackenzie said in the transcript of a speech delivered at a
Miami investor conference. "We have everything we need in our
portfolio right now to significantly increase the value of the
company."
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 and has delayed big investments. But the company's
challenges go beyond the tough market. In November, a 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 didn't
mention the disaster in his speech.
He did say that BHP would be able to increase its value by more
than 70% based solely on exploiting opportunities within the
company's existing assets and without any significant improvement
in commodities prices. To this effect, the company plans to make
investment decisions on two big projects within 18 months and
expects capital expenditure to pick up next year.
Write to Alex MacDonald at alex.macdonald@wsj.com
(END) Dow Jones Newswires
May 10, 2016 10:15 ET (14:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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