BHP CEO Andrew Mackenzie
PERTH (miningweekly.com) – Mining major BHP is aiming for a 40% increase in its base value by implementing six key strategies, CEO Andrew Mackenzie told delegates at the Bank of America Merrill Lynch Global Metals, Mining and Steel conference, in Florida, this week.
The strategies included reducing unit costs by more than 15%, accelerating the technology and innovations programme, progressing its five high-return, latent capacity projects, improving the risk-return profile of the company’s major projects to make them more competitive within the capital allocation framework, a copper- and oil-focused exploration programmed that could offer significant potential to replenish reserves, and exiting the onshore US acreage.
“Alongside this, we have reduced net debt by over $10-billion, returned $8-billion to shareholders, and crucially, replenished our pipeline with new opportunities.
“This pipeline has the potential to add a further 40% to the value of BHP subject to our strict capital allocation process,” Mackenzie said.
Mackenzie told delegates that the company’s continued delivery of its growth plans, along with stronger commodity prices, had underpinned an increase in return on capital employed from 2% to 14%.
“Our actions, together with stronger commodity prices, have also resulted in a 30% increase in BHP’s base value, which reflects our current planning forecasts, before the addition of upside opportunities,” Mackenzie said.
He noted that looking ahead, BHP was targeting a further $2-billion in productivity gains by the end of the 2019 financial year, which was in addition to the $12-billion already achieved since 2012.
The company would also use technology to unlock resources and increase productivity, while taking advantage of latent capacity opportunities that Mackenzie said had the potential to generate average returns of more than 100%.
He said that BHP would also continue to enhance its pipeline of future options, which is diversified across a number of commodities and timeframes, which had an unrisked value of more than $15-billion and the potential to deliver average returns of 17%.
The miner would also continue its exploration push into copper and petroleum, in line with the favourable market outlook for these commodities, while progressing its exit from its onshore US assets.
“Our relentless pursuit of productivity, aided by our agile and connected culture, will make sure we realise the full potential of these assets and capitalise on strong prices. On top of this we have built an extremely attractive suite of opportunities to drive further improvement,” Mackenzie said.
“As always we will be disciplined with our capital, with all investments weighed against further cash returns to shareholders.”