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BHP sell-off could undo Billiton deal – by Danny Fortson (The Australian – July 14, 2014)

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

The Sunday Times – A FEW days after Paul Anderson unveiled the largest merger in the history of the mining industry, the American boss of BHP went on a Sunday talk show to put politicians’ minds at rest. They were concerned that BHP, the 116-year-old national champion known as “the Big Australian”, was about to be lost to London.

Mr Anderson and Brian Gilbertson, head of smaller rival Billiton, had just announced a $US28 billion tie-up that would create a new natural resources Goliath.

Billiton was already listed in London. BHP, meanwhile, ran its giant oil operation from London. A relocation of the group headquarters from Melbourne seemed a distinct possibility. After all, the combined group would stretch across five continents and produce everything from diamonds and oil to nickel and iron. Why not run it from ­Europe’s financial capital?

The fears, Mr Anderson assured, were misplaced.

He said the merger was “a win-win”. There would be housekeeping to be done but a headquarters move would not be part of it. “I’m sure there will be two or three things in the portfolio that we will want to sell off … once we put the companies together,” he said.

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Australia’s big three miners look to tighten their iron grip – by Jamie Smyth (Financial Times – July 8, 2014)

 

http://www.ft.com/intl/companies/mining

Port Hedland – The man who made a US$10bn bet on the global iron ore market is predicting Australia’s big three miners will tighten their grip on the global industry over the next few years as higher cost producers fall victim to lower iron ore prices.

Andrew “Twiggy” Forrest, founder and chairman of Fortescue Metals Group, says the sharp fall in iron ore prices since the start of the year is causing some smaller Australian producers and overseas competitors to exit the industry.

“Because you have incredibly low operating costs with the big Australian producers we are seeing more substitution take place from China and India as competitors switch off production,” says Mr Forrest, who owns one-third of Fortescue shares.

“The wholesale shutting down of iron ore production industries basically happens in other countries. The Pilbara [in Western Australia] has always been historically the big player.”

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BHP nickel sale hits hurdle – by Nick Evan (The West Australian – July 9, 2014)

https://au.news.yahoo.com/thewest/

A native title ruling could throw a shadow over BHP Billiton’s attempts to sell its Nickel West assets, after the Federal Court ruling last week paved the way for native title claims over BHP’s Kambalda nickel concentrator and Gold Fields’ St Ives mine.

In a decision released last week, the Federal Court ruled that the transfer of mining tenements from State Agreements between 2004 and 2007 should have triggered negotiations for a land use agreement with the Ngadju people, who claim native title over the region around Norseman and Kambalda.

The ruling covers more than 200 mining leases transferred from State agreements originally held by Western Mining Corporation.

They include leases over BHP’s Kambalda nickel concentrator and Gold Fields’ 400,000 ounce-a-year St Ives mine, the fourth largest gold producer in Australia last year.

Gold Fields said in January the action could force the closure of St Ives if the native title claimants sought an injunction to do so.

But the company softened its rhetoric this week, saying in a statement the decision “does not affect the grant of mining tenure to St Ives”. It added operations would continue as usual pending the outcome of the process.

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BHP Billiton looks to catch up to Rio Tinto in ironman contest – by Amanda Saunders (The Age – July 7, 2014)

http://www.theage.com.au/business

Miner BHP Billiton is confident it can ”close the gap” with iron ore arch-rival Rio Tinto on margin per tonne within a few years.

And it is likely to develop the $20 billion outer-harbour project at Port Hedland rather than expand its inner-harbour operation if it moves to produce beyond its current annual run rate target of 270 million tonnes. BHP president of iron ore Jimmy Wilson says the miner is trailing Rio on margin per tonne, and ”our desire absolutely is to close that gap”.

He said the miner would never be in a competition with Rio on volumes but stressed ”where we would like to compete is on the cost of production side, more importantly, the margin per tonne that we make”.

”While we are marginally behind Rio at the moment, we’ve got to back the fact that we are going to eliminate that gap in the foreseeable future,” he says.

”What is the foreseeable future? I’d be disappointed if it took more than a couple of years. ”I do respect our competitors – Rio, Fortescue, Vale – [and] none of them is standing still either. So, I think, at the end of the day, you are going to see an improvement come through for all of those businesses.”

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Trafigura Among Six to Enter BHP Nickel Sale, Review Says – by Ben Sharples (Bloomberg News – July 06, 2014)

http://www.businessweek.com/

Trafigura Beheer BV and Sherritt International Corp. (S) are among six companies to enter the sale process for BHP Billiton Ltd.’s Australian nickel unit, according to a report from the Australian Financial Review.

Glencore Plc, X2 Resources, Jinchuan Group Co. and MMG Ltd., a unit of China Minmetals Corp., are also among bidders that have started due diligence on BHP’s Nickel West business, the newspaper reported today, without saying where it got the information. Emily Perry, a Melbourne-based spokeswoman for BHP, declined to comment in an e-mailed response.

BHP said in May it’s considering selling all or part of its Australian nickel unit as prices surge amid an Indonesian export ban on the steel hardening agent. The due diligence process may take months and BHP is keen to finalize a deal by the end of the year, the newspaper said. The business may be worth more than A$800 million ($749 million), according to the newspaper.

Michael Oke, a spokesman for London-based X2 Resources, Francis de Rosa, a Sydney-based spokesman for Glencore, and Kathleen Kawecki, a Melbourne-based spokeswoman for MMG, didn’t immediately respond to e-mails sent outside of normal business hours seeking comment on the sale process. Three calls to Gao Tianpeng, the general manager of Jinchuan’s asset operation department, went unanswered.

Amsterdam-based Trafigura and Toronto-based Sherritt didn’t immediately respond to e-mails seeking comment.

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China Miners’ Loss Is BHP’s Gain as Iron Prices Slump 44% – by (Bloomberg News – June 20, 2014)

http://www.businessweek.com/

Rio Tinto Group and BHP Billiton Ltd. (BHP), two of the world’s biggest iron ore producers, are benefiting as falling iron ore prices pressure smaller rivals in China to shut down.

The price of iron ore has plunged 44 percent from its February 2013 peak on the back of record output. That’s hurting mining companies in China where 20 percent to 30 percent of mines have closed, according to the China Metallurgical Mining Enterprise Association.

The closures are helping Rio Tinto and BHP which, along with Vale SA (VALE5), already control about two thirds of global seaborne supply from their low-cost mines. About $40 billion a year of iron ore is mined in China, the country that’s also the world’s biggest buyer of the steelmaking component.

“Many smaller mines in China have stopped production due to the falling prices,” said Sarah Wang, a Shanghai-based analyst with Masterlink Securities Corp. “It’s the right time for BHP and Rio to seize the opportunity to boost their market share.”

BHP, the world’s biggest mining company, last month also flagged the closure of some Chinese ore mines.‘ “Most of them are smaller ones, while the bigger ones are also starting to be affected,” Liu Xiaoliang, the association’s general secretary, said in an interview. “Almost 70 percent of the ore processing companies have also closed.”

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Mackenzie forges BHP Billiton’s path with touch from the past – by James Wilson (Financial Times – June 10, 2014)

http://www.ft.com/home/us

For BHP Billiton, less is more. Diamonds from the edge of the Arctic, copper from Arizona’s desert and titanium from dunes by the Indian Ocean: all are assets that the world’s most valuable resources group accumulated and subsequently decided it could perfectly well live without.

To that list of assets, sold by the miner since 2012, can be added facilities from nickel plants in Australia to South African manganese mines. An array of BHP Billiton’s assets are up for potential divestment in what Andrew Mackenzie, chief executive, says is a retreat from complexity.

“The case for continued simplification of our portfolio is compelling,” he told investors last month. This could go beyond piecemeal sell-offs, with the miner looking at “structural options” – an allusion to a possible spin-off of assets into a separate vehicle.

What shape this could take is open to question. But if most assets deemed non-core are included it would in effect leave BHP without most of what it agreed to acquire when, in 2001, it announced its landmark merger with Billiton.
Then, the Billiton assets were “a sensational fit” with BHP, in the words of Paul Anderson, first chief executive of the combined group. Now, with a few exceptions they are fringe businesses.

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BHP Billiton to follow China on its next growth journey – by Vicky Validakis (Australian Mining – June 6, 2014)

http://www.miningaustralia.com.au/home

BHP Billiton will invest heavily in energy and food as it follows China on its transition from a construction-led economy to a consumption power-house.

Speaking to the media in Beijing where he wound up a 10-day tour of meeting BHP’s commodity customers in China, India, Japan and South Korea, BHP boss Andrew Mackenzie said while Chinese steel production would remain strong the company was also keen to meet the country’s other needs.

“We see a Chinese economy gradually shifting from construction to consumption,” he told reporters yesterday, adding “and so, will we transition.”

He said materials with high consumer demand included copper, energy and potash. “Copper is core. Coal is core. Oil and gas is core. Potash is core,” Mackenzie said.

“We’ve exited diamonds. We’ve exited arguably medium-sized ore bodies which don’t fit with our overall strategy to own the great ore bodies of uranium and copper and to some extent in oil and gas. And we reduced our exposure to liquefied natural gas.

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Diversity back in vogue for miners as iron ore price tumbles – by STEPHEN EISENHAMMER, SONALI PAUL AND SILVIA ANTONIOLI (Reuters U.K. – June 5, 2014)

http://uk.reuters.com/

(Reuters) – After pouring billions of dollars into producing more iron ore to feed China’s construction boom, the world’s mega miners now face a self-induced price slump and are counting on other commodities to revive their allure to investors.

Base metals copper and nickel, oil and gas, as well as more offbeat commodities such as fertilizer potash, are increasingly important differentiators between the kings of iron – Vale , Rio Tinto and BHP Billiton – and could be welcome sources of growth this year as iron ore languishes near two-year lows.

BHP’s oil and gas portfolio and Vale’s nickel production have attracted positive attention. Glencore Chief Executive Ivan Glasenberg, meanwhile, has spoken of the advantage of smaller exposure to iron ore, saying it provided an “opportunity against our peers.”

Lack of diversity has not been an issue in recent years as Chinese demand for steel to build cities, railways and ports tripled iron ore prices from 2008 to 2011 – a windfall for the “big three” who produce 70 percent of the world’s seaborne iron ore.

But in May the price fell below the $100 mark for only the second time in four years, as production jumps just as Chinese demand growth appears to be slowing. Although many analysts see the price perking up again later this year, the fundamentals are worsening and the trend is downward.

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BHP, Rio warn strong Australian dollar will lead to more job losses – by Amanda Saunders (Sydney Morning Herald – May 26, 2014)

http://www.smh.com.au/

Mining giants BHP Billiton and Rio Tinto have warned the combination of high costs, high taxes and the strong Australian dollar has put a “vice-like grip” on the $60 billion coal industry that will force further mine closures and job losses this year.

About 12,000 jobs have been cut from the sector over the past two years amid a string of mine closures and delays to projects by companies ¬including BHP, Rio, Glencore, Vale and Peabody Energy.

BHP global coal president Dean Dalla Valle said there would be “difficult times ahead in a period of such oversupply”, particularly given many operators are not making money at ¬current depressed prices.

“You will see the industry adjust itself, shake itself out. You are going to see more exits from the market.” While both miners remain confident in the long-term outlook, they predict a brutal period ahead for the industry as prices remain under intense pressure.

The contract price of premium hard-coking coal has fallen to $US120 a tonne in the June quarter from $US330 a tonne in 2011, while thermal coal prices have dropped to $US74 a tonne on the spot market from $US125 in mid-2011.

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BHP Says in Talks for Nickel Unit Sale as Metal Price Rockets – by Elisabeth Behrmann and David Stringer ( Bloomberg News – May 14, 2014)

http://www.businessweek.com/

BHP Billiton Ltd. (BHP), the world’s biggest mining company, is holding talks for the sale of all or part of its Australian nickel unit as prices rose to two-year highs.

“The review is considering all options for the long-term future of Nickel West, including the potential sale of all or parts of the business, Melbourne-based BHP said today in an e-mailed statement. Talks with interested parties have begun, spokeswoman Eleanor Nichols said by phone.

The sale announcement comes as nickel surged 10 percent in the past week and follows comments from BHP Chief Executive Officer Andrew Mackenzie that he wants to run a smaller collection of assets. Glencore Xstrata Plc (GLEN), the global commodities trading and mining group, said in March it was assessing a bid for the assets, which could fetch about $800 million according to a report by RBC Capital Markets.

‘‘For BHP, it’s something that doesn’t move the needle any more,” Chris Drew, an analyst in Sydney with RBC, said today. “The overall size of the business means it’s not material enough for them to justify maintaining or potentially putting capital into, so it’s better off in someone else’s hands.”

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Driverless mine trucks heading for east coast – by Matt Chambers (The Australian – May 5, 2014)

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

DRIVERLESS mining trucks that are becoming more common in iron ore mines in Western Australia’s Pilbara region are expected to appear in NSW and Queensland in the next 12 months under plans being hatched by BHP Billiton.

The autonomous trucks, which cut costs by reducing the need to house, feed and employ four drivers, would be trialled at BHP coalmines, BHP coal president Dean Dalla Valle said.

BHP has followed the lead of rival Rio Tinto in introducing the robot trucks into the big iron ore mines in the Pilbara, but after coalmine trials in New Mexico, it is taking the lead in bringing them to the east coast, something Rio has not yet proposed to do.

“We’re looking at two opportunities in coal to do the same thing, in Queensland and NSW,” Mr Dalla Valle told The Australian. “There’s no doubt it will happen, and I’d like to think that within 12 months we will be running trials.”

BHP last month indicated its late-mover status in automated equipment was not a reluctance to employ the technology. It said it was extending a robot truck trial at its Jimblebar iron ore mine to the nearby Wheelara mine.

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BHP still sees [Pilbara] greenfields – by Andrew Burrell (The Australian – April 23, 2014)

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

BHP Billiton iron ore boss Jimmy Wilson has dismissed suggestions that the era of multi-billion-dollar greenfields iron projects in the Pilbara has come to an end, even as the mining giant focuses on extracting efficiencies rather than building new mines.

Mr Wilson also refused to be drawn into forecasting the iron ore price amid fears it could tumble in response to patchy Chinese economic data. He said few ¬people had any idea about the outlook for Australia’s most valuable export commodity.

Speaking at the opening of BHP’s $US3.6 billion ($3.9bn) Jimblebar mine near the town of Newman, Mr Wilson said he and his team had “impressed ourselves” by boosting production forecasts from its West Australian operations from 207 million ¬tonnes per annum to 217mtpa for this financial year.

The improved outlook had been achieved through operational improvements, productivity gains and technological innovation rather than any major capital spending. But Mr Wilson rejected suggestions that Jimblebar, along with Gina Rinehart’s $10bn Roy Hill project, could be the last greenfields mines of the Pilbara iron ore boom.

He said the reluctance by miners to allocate billions of dollars towards new mines was driven by the fact that Chinese raw steel production had slumped from a growth rate of 24 per cent almost a decade ago to as low as 3.4 per cent in coming years.

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BHP Needs Rebound, Not Spinoffs, Amid Metal Slump: Real M&A – by Angus Whitley and Elisabeth Behrmann (Bloomberg News – April 17, 2014)

http://www.businessweek.com/

A spinoff of BHP Billiton Ltd.’s (BHP) least-loved assets may do little for shareholders of the world’s largest mining company.  BHP, which is wringing out costs after a decade-long mining boom ended, said this month it’s studying “structural options” to help narrow its focus to four commodities including iron ore. With mines aging and new oil and gas fields becoming harder to find, BHP’s return on invested capital has sunk to the lowest since 2003, according to data compiled by Bloomberg.

Separating the nickel, manganese and aluminum assets from BHP probably wouldn’t boost profit at either the new or old entity, said Sanford C. Bernstein Ltd. Profit margins for the unfavored business have evaporated at the bottom of the commodity cycle and CLSA Asia-Pacific Markets said a spun-off company may be valued at $7.5 billion, just 4 percent of Melbourne-based BHP’s market value.

“There’s a long history of the larger companies succumbing to the cyclical pressures,” John Robertson, director at EIM Capital Managers Pty in Melbourne, said by phone. “If you’re going to float off a large chunk of assets that currently have a low return on capital, unless somebody’s got a magic wand, it’s really not going to do much.”

In 2011, as China devoured everything from iron ore to copper to feed economic expansion, BHP’s return on invested capital was 35 percent, Bloomberg data show. The figure slumped to 10 percent two years later because of slower Chinese growth and costs that were still aligned with a resources boom.

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UPDATE 2-BHP and Australian rivals raise iron ore targets as competition grows – by James Regan (Reuters India – April 16, 2014)

http://in.reuters.com/

SYDNEY, April 16 (Reuters) – Australian miners are racing ahead with plans to expand iron ore production to capture more of the Chinese market for the steelmaking ingredient, amid strong competition from the world’s biggest supplier Vale of Brazil.

Efforts to beat already ambitious output targets comes as a crackdown in China on using commodities as collateral to raise cash risks unleashing iron ore sales from tens of millions of tonnes sitting in Chinese port warehouses, pressuring prices.

Fortescue Metals Group Ltd, which is raising production 57 percent this year, says its needs iron ore prices to stay between $110-$120 a tonne for the next 12-18 months in order to pay off a targeted $2.5 billion in debt.

The Australian Bureau of Resources and Energy Economics forecast an average price of $110 a tonne this year but only $103 a tonne in 2015. By 2016, Citigroup sees the price falling to $80.

Iron ore was quoted at $117.10 .IO62-CNI=SI on Wednesday. BHP, the world’s biggest diversified mining company, on Wednesday lifted full-year iron ore production guidance by 5 million tonnes to 217 million as it pushes ahead with new mine work in Australia.

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