BHP to Forge Ahead With Investments

LONDON—Mining giant BHP Billiton Ltd. plans to forge ahead with investments to boost production, particularly in copper and energy, despite a continuing rout in commodities prices.

In a presentation to investors on Tuesday, BHP outlined a plan to boost its current production by more than 10%, by investing in existing operations. It said the development will cost less than $1.5 billion over a five-year period. Investments are forecast to earn average returns of about 60% based on current analyst consensus price forecasts.

"We are not waiting for prices to recover," BHP Chief Executive Andrew Mackenzie said in the transcript of a speech delivered at a Miami investor conference. "We have everything we need in our portfolio right now to significantly increase the value of the company."

Big mining companies like BHP have been hammered by a protracted slump in commodity prices stemming from slower-than-expected global growth and slackening demand in China, the world's largest consumer of many commodities. Prices for some commodities, like oil, have picked up in recent weeks, though some analysts have said prices could fall again if Chinese growth remains disappointing.

Under Mr. Mackenzie's three-year stewardship, BHP has focused on cutting costs and has delayed big investments. But the company's challenges go beyond the tough market. In November, a iron-ore tailings dam at a BHP joint venture in Brazil burst, killing 19 people and polluting more than 400 miles of river. Last week Brazilian federal prosecutors filed a lawsuit that could force BHP and its joint venture partner Vale SA to pay up to $44 billion for cleanup and fixing environmental damage. Mr. Mackenzie didn't mention the disaster in his speech.

He did say that BHP would be able to increase its value by more than 70% based solely on exploiting opportunities within the company's existing assets and without any significant improvement in commodities prices. To this effect, the company plans to make investment decisions on two big projects within 18 months and expects capital expenditure to pick up next year.

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(END) Dow Jones Newswires

May 10, 2016 10:15 ET (14:15 GMT)

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