BUSI­NESS

The Australian - - FRONT PAGE - MATT CHAM­BERS

BHP chief An­drew Macken­zie has re­vealed the high-level Chi­nese ac­cess that has made it the miner most out­wardly cau­tious about a US-China trade war, say­ing Pres­i­dent Xi Jin­ping told him per­son­ally it would “punch back” against US sanc­tions.

In Au­gust, BHP moved ahead of most global agen­cies in down­grad­ing its fore­casts for 2019 global growth be­cause of US-China trade ten­sions.

Yes­ter­day at the com­pany’s an­nual gen­eral meet­ing in Ade­laide, BHP chair­man Ken MacKen­zie said the min­ing gi­ant re­mained cau­tious about the po­ten­tial short-term fall­out from global trade ten­sions, de­spite not yet feel­ing a di­rect im­pact.

“Trade re­stric­tions pose a real threat to eco­nomic growth by di­vert­ing trade flows, af­fect­ing prices and dis­cour­ag­ing in­vest- ment,” Mr MacKen­zie said, not­ing the com­pany’s be­lief in longterm com­modi­ties de­mand growth was un­shaken.

An­drew Macken­zie said BHP had good in­tel­li­gence on China, in­clud­ing di­rectly from Mr Xi.

“Last time I was in China I had a one-on-one with Xi Jin­ping in which he came up with the quote, when I was talk­ing to him about pro­tec­tion­ism, that ‘ in the West you have this thing, turn the other cheek — in China, we punch back’,” Mr Macken­zie told the meet­ing when asked about the com­pany’s knowl­edge of China.

He said he vis­ited China about three times a year, but did not say when his most re­cent visit was.

The chief ex­ec­u­tive said he was the only min­ing ex­ec­u­tive and the only south­ern hemi­sphere rep­re­sen­ta­tive on a 15mem­ber panel of global chiefs that ad­vises the Chi­nese pres­i­dent and prime min­is­ter.

In Au­gust, BHP cut its global growth fore­casts by a quar­ter per­cent­age point (to be­tween 3.25 and 3.75 per cent) be­cause of ris­ing trade ten­sions.

The AGM was a rel­a­tively un­event­ful one for BHP, with share­hold­ers largely happy about the re­cent de­ci­sion to re­turn $US10.4 bil­lion ($14bn) of funds from the re­cent US shale oil and gas sale through a buy­back and spe­cial div­i­dend.

The Olympic Dam cop­per and ura­nium mine in South Aus­tralia was a fo­cal point at the Ade­laide meet­ing.

Ken MacKen­zie doused spec­u­la­tion that it could be time to sell Olympic Dam, whose re­turns on in­vest­ment are well be­low that of all other ma­jor BHP as­sets.

He said the im­prove­ments that could be made at the peren­ni­ally un­der­per­form­ing mine had the po­ten­tial to move the dial for even a com­pany as large as BHP.

“Olympic Dam is a core as­set for BHP, it’s the fourth-largest cop­per de­posit in the world and we’re very ex­cited about that,” Mr MacKen­zie said.

“There’s no doubt it’s been per­form­ing be­low its bench­mark, but we see that as op­por­tu­nity.

“When we have a large as­set like that, where there is an op­por­tu­nity for im­prove­ment, it can move the nee­dle on the whole com­pany, so that’s a great op­por­tu­nity.”

An­other po­ten­tial as­set sale that the BHP chair hosed down was that of the Mt Arthur ther­mal coalmine in the Hunter Val­ley.

“We have no in­ten­tion to sell that as­set,” Mr MacKen­zie said.

Mt Arthur is more valu­able to BHP be­cause the mine is housed un­der the Lon­don-listed BHP plc com­pany.

This means it can use tax cred­its from its failed in­vest­ment in the Raven­sthorpe la­t­erite nickel project in WA, which was also un­der BHP plc.

The tax cred­its are one rea­son BHP says that it does not make eco­nomic sense to unify its du­al­listed com­pany struc­ture.

Sep­a­rately yes­ter­day, BHP said that it planned to spend up to $US625 mil­lion ex­plor­ing for oil in the Or­phan Basin off New­found­land and Labrador in Ken MacKen­zie’s home coun­try of Canada.

BHP said it had won auc­tions for two ex­plo­ration blocks in the largely un­ex­plored re­gion, mark­ing its en­try into off­shore Cana­dian ex­plo­ration.

“This fron­tier op­por­tu­nity has large oil re­source po­ten­tial which we iden­ti­fied through our Global Petroleum En­dow­ment Study in 2016 and is in a low-risk coun­try, with com­pet­i­tive fis­cal terms” BHP oil and gas boss Steve Pas­tor said.

“This op­por­tu­nity de­liv­ers on our ex­plo­ration fo­cus in con­ven­tional petroleum and will lever­age our global deep­wa­ter devel­op­ment and op­er­a­tional ex­per­tise.”

The bid in­volves drilling and seis­mic stud­ies over a six-year pe­riod with a min­i­mum spend of $US157m.

It is bud­get­ing to spend its first $US140m in 2020-21 and aim­ing for its first well the year af­ter.

AAP

BHP chair Ken MacKen­zie and CEO An­drew Macken­zie at the min­ing gi­ant’s an­nual meet­ing in Ade­laide yes­ter­day

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