Marius Kloppers, CEO BHP Billiton
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BHP's Kloppers stays bullish on commodities
Allan Seccombe
Posted: Mon, 18 Aug 2008

[miningmx.com] -- BHP Billiton’s view of demand for commodities being strong in the medium to longer term is borne out by its investment in growth projects, said CEO Marius Kloppers, who singled out copper as an exciting place to be.

Kloppers also drew a fairly firm line under the company entering the platinum sector in South Africa, pointing out BHP Billiton is focussed on settling its $127bn bid for Rio Tinto and the safety risks of operating in underground mines.

BHP Billiton maintains its time line on the Rio bid and Kloppers, apart from reiterating the value argument in favour of the deal, declined to comment much further on the transaction.

Around the world, no large new copper mines have been built and mining companies have not move into fresh geographies, the head of the world’s largest resources company said.

“In the medium to longer term copper could be a very exciting product to be in,” Kloppers said.

The market has over-estimated the quantities of commodities coming from new projects, he said and this was not yet reflected in prices.

“I think people have been way too optimistic…for years on the speed at which new projects can deliver volumes,” he said, maintaining his view that Chinese and developing world demand for commodities would remain strong.

In the steel businesses in China, driven by domestic demand, there was sound offtake and the sector was strong despite a slowing in the light industrial sectors geared towards exports, he said.

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There has been a lot of speculation that BHP Billiton could be looking at entering the platinum market, possibly through the acquisition of Impala Platinum, triggered by an opinion piece on Miningmx last week.

Kloppers said BHP Billiton picked its underground mining exposure very carefully to make sure it met the group’s strict safety criteria.

In the platinum sector, which is dominated by South Africa, the mix of mining methodologies meant some operations fulfilled BHP Billiton’s safety criteria and others didn’t.

There is also a question of settling the bid for Rio Tinto, which is being scrutinised by regulatory authorities, the toughest of which is seen as those in Europe.

“We are kind of busy now and we are focused on the main event,” Kloppers said, adding of all the possible transactions available to BHP Billiton the greatest value creation was seen in the tie up with Rio Tinto.

BHP posted a one third increase in second-half profit to $9.7bn and lifted its final dividend 52% to $0.41/share, bringing the full-year payment to $0.70, which Kloppers said gave a clear indication of the way the company saw the future demand for commodities. It marked a 150% increase in dividends over three years.

"We have 28 projects in either execution or feasibility, which represents an expected capital investment of $24.8 billion. We also have other medium-term growth options with expected capital commitments in excess of $90 billion," Kloppers said.

Kloppers said production would grow by 10% in financial 2009, focussing on iron ore, base metal, petroleum products and manganese.