MELBOURNE – (Reuters) – BHP Billiton’s new chief has put his stamp on the top global miner, mapping out a cautious approach to expanding into the potash market, which it sees as its next big growth business beyond 2020.
CEO Andrew Mackenzie outlined the low-risk course as he handed down his first results, reporting a 15 percent drop in half-year profit before one-offs, which missed forecasts largely due to Australian mining tax adjustments and other non-operational items.
BHP and Glencore Xstrata wrapped up the results season for the world’s big five miners, with BHP holding up slightly better than its peers as it stepped up output of iron ore, copper, coal and oil and slashed $2.7 billion in costs in the face of sliding commodity prices.
Major miners have come under pressure to rein in spending, sell off underperforming assets and tackle debt after years of rampant spending on new mines and acquisitions as commodity prices soared. Reflecting the austerity drive, BHP said it plans to invest $2.6 billion over the next four years digging shafts at the Jansen potash project, delaying production at least until 2020 from its original 2015 target, while inviting offers for stakes in the mine.
“The whole basis of the strategy that we’re being clear about today is that we want to retain complete flexibility to enter the market at a timing which we think is right to maximise returns for our shareholders,” Mackenzie told reporters.
BHP put more than $40 billion worth of new projects on ice a year ago to combat costs that had grown out of control over the previous decade as miners raced to feed booming Chinese demand.
Mackenzie reiterated that BHP remains confident in China’s long-term growth prospects, as 250 million people move into cities and the country rebalances its economy toward consumption-led growth.
“In the short to medium term, I think the signs are reasonably positive that they’ll hold to their forecast for 7-8 percent annual growth,” he said.
He outlined a more aggressive cut in capital and exploration spending than recently flagged, with spending to fall 26 percent to $16.2 billion in the 2014 financial year.
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