BHP has plan for further cost reduction already worked out
THE WORLD’S biggest mining group, BHP Billiton, said yesterday it was in the progress of further cost reductions and implementing technology programmes to improve safety and unlock resources in a bid to grow value and improve returns.
The chief executive of the Australian mining giant, Andrew Mackenzie, said the miner was in the process to achieve its ambitious plans as outlined last year.
Mackenzie said BHP had made consistent progress since then and was confident that continued delivery of these plans could grow the value of the company by up to 50 percent and almost double the return on capital.
Value creation
Mackenzie was speaking at the Bank of America Merrill Lynch Global Metals, Mining and Steel Conference.
He said key contributors to value creation included further cost reductions, which supported a 10 percent value uplift.
“We have achieved a great deal over the past year, but we are not standing still,” Mackenzie said. “Our road map today contains an enhanced set of opportunities that will see us prosper and grow value per share throughout the cycle, and in multiple price scenarios.”
Mackenzie said advances in the operating capability and capital productivity of BHP’s shale assets also continued to lower drilling and completion costs, supporting returns on invested capital in excess of 30 percent on incremental investments.
He said BHP’s focused petroleum exploration programme had an unrisked value of more than $20 billion (R265.2bn), close to a quarter of which sits in low to medium-risk prospects to be tested in the next two years.
Mackenzie said technology programmes to improve safety, lower costs and unlock resources with an unrisked value of up to $12bn were among the most capital-efficient options in the portfolio.
Attractive options included leaching optimisation, mass mining methods and precision extraction.
“Above all, we will remain disciplined, and drive consistent and transparent application of our capital allocation framework, which includes cash returns to shareholders. Our path is deliberate, with value and returns at the centre of everything we do,” Mackenzie said.
Meanwhile, BHP Billiton announced that it was rebranding itself by changing its name back to just BHP from this week.
However, the rebranding would not immediately include plans to formally change its listed name.