Ex BHP chairman says cycles move and he’s a happy shareholder – by Simon Evans (Sydney Morning Herald – August 21, 2014)


Former BHP chairman Jerry Ellis, who led the miner during one of its darkest periods in the late 1990s before it pursued a merger with South Africa’s Billiton, says the company is performing well and maintains the 2001 merger was a good move.

Mr Ellis says BHP needed its cash flows strengthened at the time, but the situation had now changed and the “cycle has moved on”.

He was chairman of BHP from 1997 to 1999 after joinng the board in 1991. He was also a former boss of the BHP ¬Minerals division and an active promoter of a decision by BHP to pay $3.2 billion for Magma Copper in the United States in 1996.

It ultimately proved to be a disastrous purchase when copper prices slumped dramatically and heavy writedowns were needed. Many analysts blame that acquisition for weakening the company to a point where it needed to pursue a merger.

“I’m a shareholder and very pleased with the way the company is travelling,’’ he said on Wednesday. BHP Billiton on Tuesday officially confirmed a $14 billion demerger plan where it is spinning off many of the assets Billiton brought to the table in the 2001 merger.

“I think [former chairman]Don Argus summed it up very well. At the time BHP needed the cash flow from the Billiton assets,’’ Mr Ellis said.

Mr Ellis was referring to the rationale previously outlined by Mr Argus, who was chairman of BHP Billiton from 1999 to 2010 and who oversaw the merger between BHP and Billiton. “The cycle has moved on,’’ Mr Ellis said.

In the past few years the BHP Billiton assets at the core of the company had grown much faster and were strong producers with lower costs and had outpaced some of the Billiton assets.

“So some of the Billiton assets are less attractive,’’ he said. But he emphasised that he doesn’t keep in close contact with the current BHP Billiton management or board.

“I don’t believe old-timers should hang around,’’ he said.

John Prescott, the former chief executive of BHP from 1991 to 1998, said on Wednesday he didn’t want to talk about BHP Billiton’s spin-off proposal for non-core assets.

“It’s been 16 years and I’m not going to answer questions about them. I’ve made a practice of not talking about them since I left and that continues,’’ he said referring to a strict policy of steering clear of commenting on BHP Billiton matters.
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