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RPT-COLUMN-Elliott’s BHP adventure pays dividends, but not total victory – by Clyde Russell (Reuters U.S. – August 22, 2017)

https://www.reuters.com/

LAUNCESTON, Australia, Aug 22 (Reuters) – It’s tempting to think that BHP Billiton has caved into demands by activist investor Elliott Advisors by agreeing to sell its U.S. onshore oil and gas business and by boosting the returns to shareholders.

After all, divesting the U.S. shale assets and lifting shareholder returns were two of Elliott’s three main points, made by the hedge fund in a letter to BHP directors in April. But it’s worth asking whether the decision to put the shale assets up for sale and increase dividends was motivated mainly by Elliott’s intervention, or whether they would have happened anyway.

As far as dividends are concerned, it was always likely that BHP would follow fellow miners like Rio Tinto in returning substantially more cash to investors, especially in the light of the huge boost to free cash flow from sharply higher prices for iron ore and coal.

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BHP’s US$14B Saskatchewan mine delay comes amid dark outlook for potash producers – by Jesse Snyder (Financial Post -August 23, 2017)

http://business.financialpost.com/

BHP Billiton Ltd.’s decision to delay a major potash mine in Saskatchewan comes amid a persistent weakening of demand for fertilizer, leading producers to shelve major investments and ink sizeable mergers with competitors to boost revenues.

On Tuesday, Melbourne-based BHP announced it would delay its multi-billion dollar Jansen potash mine, located about 150 kilometres east of Saskatoon. Analysts estimate the project could cost as much as US$14 billion to complete.

The decision comes amid a shaky outlook for Canadian potash producers, who have been forced to scale back major mining developments in the face of low commodity prices. It will also delay BHP’s entrance into the potash sector, as the company faces intense pressure from activist hedge fund Elliott Management Corp. to shed some of its underperforming assets.

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Funds to Go for BHP’s Jugular If Miner Doesn’t Deliver Goods – by David Stringer (Bloomberg News – August 20, 2017)

https://www.bloomberg.com/

BHP Billiton Ltd.’s truce with activist investors led by billionaire Paul Singer won’t last long if the world’s biggest mining company doesn’t pump up returns and deliver on strategic reform in the wake of its expected bumper profit report this week.

The naming in June of BHP’s youngest director Ken MacKenzie, 53, as chairman from next month has helped soothe disgruntled shareholders including Singer’s Elliott Management Corp., while continued demand growth in China for iron ore to coal is boosting prices, swelling earnings’ forecasts and raising expectations for higher payouts.

“They’ve got the most breathing space they’ve had in a long time,” Peter O’Connor, a Sydney-based analyst with Shaw and Partners Ltd., said by phone. “But if they mess up, the activists are going to be back on their jugular.”

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BHP commits $2.5bn to extend life of Spence copper mine in Chile – by Cecilia Jamasmie (Mining.com – August 17, 2017)

http://www.mining.com/

Mining giant BHP (ASX:BHP) greenlighted Thursday a long-awaited $2.46 billion expansion of its Spence copper mine in Chile, which will add another 50 years to the operation’s productive life.

The decision comes at a time when copper prices have reached their highest levels since late 2014 and will boost BHP’s annual copper production by around 185,000 tonnes of copper over the first decade of the expanded operation, with first production expected in 2021.

Spence’s expansion contemplates the construction of a concentrator plant and a desalination plant at Mejillones port, located about 60 km north of Antofagasta city, which will be built and operated by a third party. BHP has committed to a 20-year lease nominally worth $1.43 billion.

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As Good as It Gets: Iron Ore Risks a Reversal as China Cools – by Jasmine Ng (Bloomberg News – August 15, 2017)

https://www.bloomberg.com/

Iron ore in the $70s a ton may be as good as it gets for some time. After rallying hard in June and July, the commodity may see its gains unravel over the second half as steel production in China eases back from a record pace just as global miners pump up volumes.

The robust demand that’s supported gains may fade as steelmakers start to dial back output, according to Capital Economics Ltd., which came out first among forecasters in the second quarter, according to data compiled by Bloomberg. Others expecting a drop include Citigroup Inc., Sucden Financial Ltd., Axiom Capital Management Inc. and hedge fund Academia Capital.

“There was some fundamental support for iron ore’s rally, namely strong growth in China’s steel output,” Caroline Bain, chief commodities economist at Capital Economics, said by email. “Stocks at China’s ports are now stubbornly high and if, as seems likely, steel production and demand eases back later in the year, then we see iron ore prices coming under renewed pressure.”

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Activist Shareholder Elliott Raises Stake in World’s Biggest Miner – by David Stringer (Bloomberg News – August 16, 2017)

https://www.bloomberg.com/

BHP Billiton Ltd. appears to be heeding investors’ calls for change, activist shareholder Elliott Management Corp. said, disclosing it has boosted its holding in the world’s biggest mining company.

Paul Singer’s Elliott raised its stake in BHP’s London-traded shares to 5 percent, the fund said Wednesday in a statement, from a 4.1 percent interest in April. The fund has an economic interest in 0.5 percent in BHP’s Sydney-listed shares, according to its website.

Under U.K. law, investors holding 5 percent or more have power to call a company meeting. BHP declined to comment on Elliott’s change in holdings.

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Exclusive: Mitsui, Cobra in talks with BHP over desalination plant – sources – by Gram Slattery (Reuters U.S. – August 10, 2017)

https://www.reuters.com/

SANTIAGO (Reuters) – A consortium made up of Mitsui & Co and Grupo Cobra is in exclusive talks with BHP Billiton Plc to build an $800 million desalination plant at its Spence copper mine in Chile, two sources with knowledge of the process told Reuters this week.

This means BHP, the world’s biggest mining house, is advancing the contracting process for a planned $2.5 billion expansion at Spence, a project that has been on ice for years.

A number of other companies bid on constructing the plant, including a consortium of Canada’s Brookfield Asset Management and Spain’s Acciona, but BHP has selected the Mitsui group to go ahead with bilateral negotiations, said the sources, who requested anonymity because the matter is private.

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BHP turns to electric car batteries to recharge its nickel business – by James Regan (Reuters U.S. – August 9, 2017)

http://www.reuters.com/

SYDNEY (Reuters) – The rise of electric vehicles is driving the world’s biggest mining house, BHP, to switch gears and invest heavily in its long-suffering nickel business.

Eduard Haegel, division chief of BHP Nickel West, said the company planned to spend more than $43 million building a nickel processing plant near Perth, Australia as part of a broader plan to reposition the business around batteries.

Haegel told the “Diggers and Dealers” conference in Australia he expected demand for batteries used to power electric cars to account for about 90 percent of Nickel West’s output within five or six years, replacing traditional markets, such as stainless steel makers.

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BHP presses for cheaper power ahead of Olympic Dam mine expansion (Reuters U.S. – August 4, 2017)

https://www.reuters.com/

MELBOURNE (Reuters) – BHP Billiton is looking for ways to shore up power supply and bring down power costs at its Olympic Dam copper mine in Australia, as it plans to expand following a string of electrical outages, the mine’s head said on Friday.

The mine has been badly hit by an energy crisis in Australia stoked by the rapid rise of wind power and closure of coal-fired power plants. This has destabilized the national grid and soaring natural gas prices have driven up power tariffs.

A blackout last year forced Olympic Dam to shut for two weeks, costing the company $105 million. Over the past year, rising power bills have added around $30 million to its costs.  Olympic Dam President Jacqui McGill said security of supply, price and system reliability are all challenges for the mine.

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BHP’s Canadian potash plan not a done deal – by Matt Chambers (The Australian – July 31, 2017)

http://www.theaustralian.com.au/

It is unlikely that BHP’s latest $US4.7 billion ($5.8bn) plan for its Jansen potash project in Canada — which chief executive Andrew Mackenzie is aiming to have in ­directors’ hands for approval within a year — will go ahead with­out ­substantial improvements to ­design or the ­market outlook.

Mackenzie put the big Canadian potash project back on the drawing board as BHP’s major medium-term mining growth option, alongside a Spence copper mine expansion in Chile, just two months ago, after previously flagging a slowdown and even mothballing of the project. So it is expected to be a focal point of briefings after BHP delivers an expected full-year profit of $US7.2bn later this month.

At Spence, a $US2bn underground mine approval is looking very likely in the next few weeks, as copper sentiment is running hot and BHP has cut a previous cost estimate by a third, boosting the expected rate of return to around 15 per cent.

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Goldman turns bullish on iron ore – for the moment – by Jasmine Ng (Australian Financial Review/Bloomberg – July 28, 2017)

http://www.afr.com/

Goldman Sachs boosted its iron ore forecasts after better-than-expected demand in China raised prices, but warned that it remains bearish on next year amid prospects for plentiful mine supplies and a worldwide glut.

The three-month forecast was raised to $US70 a tonne from $US55, and the year-end target increased by $US5 to $US60, according to a report from analysts including Yubin Fu and Max Layton received on Thursday. Next year, prices are still expected to drop, it said.

Iron ore has surged in recent weeks to top $US70 a tonne on sustained demand from China, the largest user. Steel mills in the country have benefited from rising product prices and strong profit margins after the government shuttered some capacity, and remaining producers are making record volumes.

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World’s Biggest Miner Speeds Hunt for Copper in ‘Last Frontier’ – by David Stringer, Laura Millan Lombrana and Stephan Kueffner (Bloomberg News – July 25, 2017)

https://www.bloomberg.com/

BHP Billiton Ltd., the world’s biggest miner, has opened an office and is seeking to add staff in Ecuador as it advances a search for copper in a nation that’s becoming the sector’s exploration hot-spot.

Melbourne-based BHP’s local unit, Cerro Quebrado, will spend about $82 million on exploration, having established a base in the capital, Quito, and advertised for workers including a senior geologist. The value of Ecuador’s mining sector could rise to $7.9 billion by 2021 from $1.1 billion this year as major players arrive, according to Fitch Group’s BMI Research.

BHP joins Australian competitors including billionaire Gina Rinehart’s Hancock Prospecting Pty, Fortescue Metals Group Ltd. and Newcrest Mining Ltd. in establishing offices or adding exploration licenses in the nation, according to Rodrigo Izurieta, president of Ecuador’s Mining Chamber.

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BHP defends plan to invest $6bn in Canadian potash project – by Matt Chambers (The Australian – July 24, 2017)

http://www.theaustralian.com.au/

BHP Billiton has defended its contentious plans for a fresh $US4.7 billion ($5.9bn) investment to bring the Jansen potash project in Canada’s Saskatchewan into production, saying low prices are expected to rise as oversupply eases. The mining giant added that the project would only go ahead if strict investment hurdles were overcome.

The defence, posted to its website earlier yesterday, comes after US fertiliser giant Mosaic cast doubt on the plan’s timing and economics and as US activist fund Elliott uses the plans to open up a new front in its campaign to restructure BHP.

BHP’s principal potash analyst, Paul Burnside, said the Jansen project, where BHP has already approved $US3.8bn to access the 1km deep ore body ahead of a development decision, could support attractive shareholder ­returns over decades. “We’re excited to have this option in our portfolio, and there are many ways we can realise value from it,” Mr Burnside said.

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BHP’s $6bn potash play a misstep, warns Elliott Management – by Matt Chambers (The Australian – July 20, 2017)

http://www.theaustralian.com.au/

New York hedge fund Elliott Management says BHP Billiton’s plans to approve a $US4.7 billion ($6bn) potash project in Saskatchewan are alarming, with the activist fund querying whether potash could be “the next shale”.

“This sounds alarmingly familiar and comes as the company proclaims the dubious strategy of ‘Thinking Big’ — a concept that has been disastrous for BHP shareholders,” an Elliott spokesman said. “We share the deep concerns raised by analysts and shareholders that expanding into potash could be a severe strategic misstep,” Elliott said, without naming the analysts or shareholders.

“Think Big” is the slogan BHP has used in a $10 million ad campaign in recent months that has dropped the Billiton name for marketing purposes.

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Potash call marks fork in the road for BHP’s Ken MacKenzie – by Stephen Bartholomeusz (The Australian – July 18, 2017)

http://www.theaustralian.com.au/

It could be regarded as a deliberate provocation, a statement of defiance and intent. The latest addition to BHP Billiton’s “Prospects” blog will, intentionally or not, irritate the group’s activist stalker, Elliott Management and its supporters. In the blog item, BHP’s principal potash analyst, Dr Paul Burnside, makes the demand-side case for potash, promising an analysis of the supply side in a future entry.

The issue is somewhat controversial in the context of BHP and Elliott’s attempt to force its own agenda on the company. BHP has, of course, already committed $US3.8 billion to its Jansen potash project in Canada and earlier this year foreshadowed a decision as early as next year on whether to proceed with the first phase of a project that could cost a further $US8bn to $US10bn.

Despite the dramatic reductions in its capital investment once the commodity boom ended, BHP and its chief executive Andrew Mackenzie have remained enthusiastic about the long-term prospect of entering the potash market and adding a “fifth pillar” to BHP’s portfolio of iron ore, coal, copper and petroleum.

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