BHP Chief Says Spending Necessary Through Commodity Down Cycles

Industry News 09:50:55AM Jun 06, 2012 Source:SMM

(Reuters) - BHP Billiton , the world's biggest mining company said on Wednesday it was necessary to maintain investment in new projects even through down periods in commodities price cycles.

"It is quite often the case that an investment decision in a particular commodity will be made in a part of the business cycle that results in a low price environment for that particular commodity, but the investment is made nevertheless in recognition of the expected future demand and prices," BHP Chief Executive Marius Kloppers told a business forum in Perth.

Slumping commodity prices and escalating costs have squeezed cash flows, pushing BHP to join rival Rio Tinto in reconsidering the pace of their long-term expansion in countries such as Australia and Canada.

The miner was planning to finance the expansion with its cash flows, which analysts forecast may fall 20 percent to around $24 billion in the year ending June.

BHP has long maintained that it is committed to keeping its single-A credit rating, another constraint on spending. As of December, the company had net debt of $21.5 billion.

Three major projects are vulnerable: the Outer Harbour development at Port Hedland in Western Australia crucial to its iron ore growth, the expansion of the Olympic Dam copper and uranium mine in South Australia, and its Jansen potash project in Canada.

 

 

BHP Chief Says Spending Necessary Through Commodity Down Cycles

Industry News 09:50:55AM Jun 06, 2012 Source:SMM

(Reuters) - BHP Billiton , the world's biggest mining company said on Wednesday it was necessary to maintain investment in new projects even through down periods in commodities price cycles.

"It is quite often the case that an investment decision in a particular commodity will be made in a part of the business cycle that results in a low price environment for that particular commodity, but the investment is made nevertheless in recognition of the expected future demand and prices," BHP Chief Executive Marius Kloppers told a business forum in Perth.

Slumping commodity prices and escalating costs have squeezed cash flows, pushing BHP to join rival Rio Tinto in reconsidering the pace of their long-term expansion in countries such as Australia and Canada.

The miner was planning to finance the expansion with its cash flows, which analysts forecast may fall 20 percent to around $24 billion in the year ending June.

BHP has long maintained that it is committed to keeping its single-A credit rating, another constraint on spending. As of December, the company had net debt of $21.5 billion.

Three major projects are vulnerable: the Outer Harbour development at Port Hedland in Western Australia crucial to its iron ore growth, the expansion of the Olympic Dam copper and uranium mine in South Australia, and its Jansen potash project in Canada.