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Mining & Industrial





BHP betting on long-term boom

23rd August 2007, 7:00 WST



Mining giant BHP Billiton has shrugged off the US sub-prime credit crisis by placing a $US70 billion ($87.5 billion) bet that the resources boom will run for decades.

Handing down yet another Australian record annual profit of $US13.4 billion, BHP revealed plans to spend a staggering $US70 billion on new projects and expansions over the next decade.

BHP’s unrivalled growth pipeline includes 33 projects worth $US20.9 billion that are either already under construction or in final feasibility stage. Another $US50 billion in projects are classed as “medium-term options”.

Outgoing chief executive Chip Goodyear said the pipeline reflected BHP’s faith in the long-term outlook due to the “secular change” caused by China and India’s rapid development.

“This is a company that is opportunity rich,” he said. “So we are optimistic about this secular change and … I think the next couple of decades are going to be very strong.

“There are going to be little bumps along the way, but that is an opportunity for a strong company like ours.”

Mr Goodyear said BHP was unfazed by the US credit crunch because it was “business as usual” in key developing markets.

Marius Kloppers, who will succeed Mr Goodyear next month, said BHP would still be on watch for acquisition opportunities, but believed the group’s vast project pipeline already gave it a big competitive edge.

The massive investment plan covers virtually every major commodity and stretches across the globe.

However, BHP’s WA operations are certain to soak up a big portion of the spending for years to come.

Mr Kloppers singled out BHP’s plans to treble the capacity of its Pilbara iron ore business to more than 300 million tonnes within 10 years.

He said every tonne of extra capacity had historically cost about $100 to achieve, which suggested it would take “$20 billion of investment roughly speaking to get there”.

Mr Kloppers also cited the potential for multi-billion-dollar LNG developments in WA, where the Woodside-operated Browse Basin venture and BHP’s own Scarborough and Thebe gas projects are being evaluated.

Though BHP was committed to a $US5 billion-plus expansion of the Olympic Dam copper-uranium mine in South Australia, it would not be rushed into action because of the vast scale of the project.

“It’s got a 100-year reserve life, so we’ve got to get it right … and are going to take as long as it takes,” Mr Kloppers said.

BHP’s profit was built on a 21 per cent rise in sales to $US47.47 billion reflecting higher production and $US7.1 billion in higher prices, especially for nickel.

The company boosted its final dividend 46 per cent to US27¢ a share, or a fully franked 33¢ for Australian investors, payable on September 28.