Business | General

BHP upbeat despite commodity weakness

Mining giant reiterates its commitment to the huge Olympic Dam copper and uranium project

  • AFP
  • Published: 15:11 August 26, 2012
  • Gulf News

  • Image Credit: Bloomberg
  • Conveyor belts at the crushing facility at Fortescue Metals Group, Cloudbreak Iron Ore operation in Australia.

Sydney: Mining giant BHP Billiton said on Sunday it aimed to increase production and hike spending despite a 35 per cent slump in yearly profit, citing “attractive opportunities” despite cooling in key market China.

The world’s biggest miner also reiterated its commitment to the huge Olympic Dam copper and uranium project — delayed last week after it declared its first profit drop in three years — saying it would one day be a “very major” mine.

BHP chief Marius Kloppers said the firm hoped to spend $22 billion (Dh80 billion) on projects this year, up from $20 billion last year, playing down the decision to scrap the Olympic Dam expansion in favour of a cheaper option.

“The combination of high exchange rate, high cost and high energy costs which we’ve got in Australia at the moment is a pretty unique set of circumstances,” Kloppers told ABC television.

“If you can get any of those variables to change — plus we can make some technological breakthroughs — then we still think this is a wonderful ore body which is going to be a very major mine in due course.

“I would not be satisfied entirely if we didn’t manage to grow volumes by about ten per cent or so over each of the next two years,” Kloppers said.

Declaring a drop in annual profit to $15.42 billion amid plunging commodity prices, BHP warned on Wednesday there would be no major project approvals over the next 12 months and the viability of more costly parts of its business was under review.

But Kloppers said “in reality what we are talking about is just slowing the rate of capex growth going forward”, as he hailed China’s prospects after Australia’s resources minister declared the commodities boom “over”.

Investing

“I must emphasise that we’re clearly going to be investing a great deal of money in the next 12 months,” he said.

“The rate of growth in China may have slowed down a bit, [but] China’s economy is very definitely still growing, and growing at the highest rate of the major economies in the world,” added Kloppers.

“We believe that while the absolute demand growth for products is going to be lower than we’ve seen in some recent years we still believe there are very attractive opportunities for our company and indeed for Australia.”

He said it would be a “couple of years” before the revamped Olympic Dam expansion went ahead, adding that BHP’s major focus was in the energy and copper sectors, seeing them as key earners along with iron ore and coal needed for steel production.

Looking ahead Kloppers said potash fertiliser would be a priority, with BHP hoping it “can become a substantial profit driver for the company in due course”.

BHP failed in a hostile takeover bid for the fertiliser group Potash Corporation in 2010 after the deal was knocked back by the Canadian government.

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