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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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At BHP, the stars align for second run at Potash Corp – by Boyd Erman (Globe and Mail – April 15, 2014)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

A window is opening for BHP Billiton Ltd. to once again try a takeover of Potash Corp. of Saskatchewan.

Speculation is intense in the fertilizer industry that BHP may mount another campaign to win over Saskatoon-based Potash Corp. after being shot down in 2010. It failed the federal government’s murky “net benefit test” after a strong push from a Saskatchewan government that opposed the transaction.

Bankers, executives and advisers on the political side agree that BHP would be crazy not to look again. To be clear, there is no sign that any potential deal is under way. But there are numerous reasons that people are talking about the possibility.

The numbers work. The personalities are closer to working. Even the politics are not insurmountable because the landscape has shifted, especially in Saskatchewan. Finally, what was true in 2010 remains true now: Owning Potash Corp. is the best way to get into the potash business.

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COLUMN-BHP’s “unloved” assets may be better long-term bet – by Clyde Russell (Reuters U.K. – April 14, 2014)

http://uk.reuters.com/

LAUNCESTON, Australia, April 14 (Reuters) – “Unloved” was a word that popped up several times in relation to BHP Billiton’s mooted plans to spin-off its non-core aluminium, nickel and manganese businesses.

It’s worth looking at the language used to describe and frame corporate plans as this is more often revealing that the bland statements companies tend to issue.

BHP Billiton didn’t use the word “unloved” itself, that was the description applied by news outlets, among them Reuters, the Sydney Morning Herald and the Wall Street Journal.

What BHP Chief Executive Andrew Mackenzie did say was the world’s largest mining company was looking at a range of options in the “next phase of simplification,” but would only pursue those that enhanced shareholder value.

BHP has identified four key pillars of its business – iron ore, copper, coal and petroleum – with potash a potential fifth. This leaves the so-called unloved assets as aluminium, alumina, bauxite, nickel and manganese.

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BHP polishes up nickel unit as demerger talk swirls – by James Regan (Reuters India – April 11, 2014)

http://in.reuters.com/

SYDNEY, April 11 (Reuters) – Breakthroughs in the way BHP Billiton processes nickel ores could help the world’s biggest miner find a buyer for its ailing Nickel West division in Australia.

Nickel West is among businesses that also include aluminium and manganese which BHP has grouped into a single division set aside in 2012 for underperforming assets deemed non-core to its portfolio. BHP has said it is actively studying the “next phase of simplification” of the company but declined to comment on media reports that senior executives favoured a demerger.

Chief Executive Andrew Mackenzie has said BHP will focus on its large iron ore, copper, coal and petroleum businesses, while selling off smaller, less profitable operations. Macquarie Bank last month in a research note put a value of $4.6 billion on the nickel assets.

Improvements in the way BHP mines nickel together with better market dynamics and exploration successes could save Nickel West from closure.

A programme at Nickel West to extract full value from ore that would otherwise be uneconomic to treat due to high contents of talc is opening up more of BHP’s rich Mount Keith and Yakabindie deposits in Western Australia for mining, enhancing the potential appeal to outside investors.

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BHP Billiton Signals Confidence in Its Coal Business – by Rhiannon Hoyle (Wall Street Journal – April 2, 2014)

http://online.wsj.com/home-page

Coal Chief Speaks Out as Group Mulls Asset Sales

SYDNEY—The head of BHP Billiton Ltd. BHP.AU +0.86%’s coal business signaled confidence in the outlook for the strained global coal industry, forecasting increases in world demand for decades to come.

Dean Dalla Valle said he expects most demand growth to come from outside China, which has been the primary driver of global commodity prices in recent years. China currently accounts for about half of the world’s coal consumption.

“Over the next couple of decades we expect global growth in demand for both energy coal and metallurgical coal,” he said in a speech in Brisbane Wednesday. Although “the likes of India, a country not overly endowed with metallurgical coal, [is] anticipated to be the most significant source of new demand” for coal used in steelmaking, he said.

India is the world’s third-largest importer of coal, after China and Japan, according to the World Coal Association. China, the largest producer of metallurgical coal, will continue to be a major importer of the raw material from mining hubs like Australia and Indonesia, Mr. Dalla Valle said. Additional Chinese demand for steelmaking coal is expected to be mostly met by domestic mines.

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UPDATE 1-BHP Billiton weighs spin-off of unloved assets – by Sonali Paul (Reuters U.K. – April 1, 2014)

http://uk.reuters.com/

MELBOURNE, April 1 (Reuters) – BHP Billiton is weighing a range of options to simplify its portfolio of assets, including a possible spin-off of unwanted businesses such as aluminium and nickel into a separate company, the top global miner said on Tuesday.

“We continue to actively study the next phase of simplification, including structural options, but will only pursue options that maximise value for BHP Billiton shareholders,” the company said in a statement.

Chief Executive Andrew Mackenzie has said over the past year that the company plans to focus on its large iron ore, copper, coal and petroleum businesses, while selling off smaller, less profitable operations.

The company’s statement on Tuesday came shortly after The Australian Financial Review newspaper reported that BHP was considering spinning off non-core assets into a separate company, offering shares to existing shareholders.

BHP shares rose as much as 2.2 percent to a three-week high after the report. They last traded up 1.7 percent at A$37.10 in a weaker broader market. Spinning off a company with non-core assets would allow BHP to pare down at a time when it may be difficult to find buyers willing to pay a good price. It could also help flush out a buyer.

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China’s steel meltdown will ripple around the world – by Carl Mortished (Globe and Mail – March 27, 2014)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

LONDON — There’s too much mining, and too much iron ore. Overproduction will take the price of steel’s raw material down by almost a third over the next few years, says Australia’s official forecaster. A supply glut could be just part of the problem, because a swathe of Chinese steel makers are burdened with too much debt – and Beijing is not keen on bailouts.

Australia’s iron triumvirate – Rio Tinto Group, BHP Billiton Ltd. and Fortescue Metals Group Ltd. – are ramping up production, and chasing market share at the expense of prices. The frenzied digging means that the country’s exports of ore are expected to rise by almost a fifth to 680 million tonnes this year.

Australia’s Bureau of Resource and Energy Economics is predicting that by 2019, the iron ore price will fall from last year’s average of $126 (U.S.) per tonne to $87.

The price has already declined by a fifth since the beginning of this year, moving close to $100 per tonne, amid concerns that China’s export engine is slowing.

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BHP workers brace for uncertainty – by Neale Prior (The West Australian – March 10, 2014)

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

Nickel West workers are bracing for a year of uncertainty as mining giant BHP Billiton embarks on a formal campaign to sell the underperforming mining and processing wing.

After slashing the book value of the operation by $US1.6 billion, BHP is believed to have appointed international investment bank Goldman Sachs to find a buyer.

The Goldman Sachs appointment leaked over the weekend via The Australian Financial Review after speculation building out of London last week that BHP was offloading its WA poor relation.

The nickel arm has been starved of capital and sits outside BHP’s favoured areas of iron ore, coal, petroleum and copper.

The sale push puts the jobs of up to 2000 employees and contractors in play and fans fears that BHP could close all or part of the division if it cannot reach acceptable sales terms.

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