‘More Mack’ to grow BHP

THERE is one thing and only one thing for BHP to do with the $14 billion that is going to, well, “flow” in the door from the sale of its US shale business – and thank goodness board and management know it only too well.

That is, and I quote from BHP CEO Andrew Mackenzie’s statement last week: “return the net proceeds from the transactions to shareholders”.

Bluntly, BHP chewed up somewhere between $20 billion and $25 billion of its shareholders capital in its shale “good idea at the time”; any suggestion that shareholders should leave the $14 billion that wasn’t chewed away with board and management to have another “good idea at the time” would be outrageous.

There’s a linked but separate “good idea at the time” – that this is a good time for Mackenzie to pass the baton to a new CEO.

He’s shown a superb skillset in rationalising and consolidating the BHP business portfolio and driving a spectacular productivity dynamic (as indeed has the other Pilbara twin Rio Tinto).

Job done, that’s Mackenzie’s skillset and so it’s time to find a “growth CEO”, goes the patter. Not on your Nellie. The last two things BHP needs is a new CEO trying to make their mark and a portfolio of “good ideas at the time” to choose from.

It is a time for “more Mackenzie” – extended consolidation, further productivity gains and organic growth. And heck, give him a chance to earn some postshale bonuses.

In short, BHP should spend some time sitting on its tier one cash generators, while “mining” under-utilised assets and opportunistically growing out its asset base, including by targeted acquisition. And saving itself from temptation by giving all the surplus cash back to the owners of the cash: shareholders.