BHP Billiton to invest US$10bn during 2010

[] — Resources giant BHP Billiton on Thursday said it planned to invest about US$10 billion in capital and exploration expenditure during the 2010 financial year.

Over the last year the group approved four growth projects worth US$5.9bn, bringing its pipeline of projects currently in execution to about $14bn.

This comes as the group anticipates a rebound in demand on the back of a recovering global economy.

Speaking at the group’s annual general meeting (AGM), BHP Billiton CEO Marius Kloppers said while spot prices for its commodities increased by up to 90% from the absolute lows of the year, commodity prices at the end of
its financial year were still generally 20% to 60% lower than at the start of the year.

Kloppers said 2009 stands out as a tough year that strongly tested the industry as a whole.

“Coming off a period of a number of years of unwavering strong demand for resources, many of our peers had to rethink their long-held growth plans and make an about-turn in strategy in response to the global economic downturn,” said Kloppers, adding that for many of the group’s competitors, long-term shareholder value had to be sacrificed in order to manage through the down cycle.

“This meant scaling back or scrapping short term growth for long term security and – in some cases – for survival,” he added.

But he pointed out that BHP Billiton was not immune to the challenges the economic downturn presented.

Very early in the global financial crisis the group acted to curtail production across its metallurgical coal, manganese, nickel and iron ore pellet operations to protect its business from the impact of cash negative operations.

“Because of this disciplined approach we have, over time, built a portfolio of exceptional assets that has allowed us to deliver an underlying EBIT margin for the 2009 financial year of more than 40%. Our focus on disciplined capital management ensured we were better prepared than most to not only manage through the downturn but to continue to invest substantially in growth,” Kloppers said.

The group’s balance sheet has been managed to leave it well positioned to take advantage of any opportunities the current market delivers, such as the Western Australia iron ore production joint venture with Rio Tinto.

“This joint venture will see us invest a further $5.8 billion beyond the already sanctioned projects,” said Kloppers.

At 14:30 shares in BHP Billiton were 1.32% or 2.85 rand up at 219 rand on the JSE. The stock has gained 7.31% or 14.92 rand this month to date.