Eurobench.com

voda 31 oktober 2014 16:10

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BHP and Rio will relent on expansions - Cliffs Natural

SMH reported that the fifth biggest iron ore exporter from Australian shores has predicted that Rio Tinto, Vale and BHP Billiton will not be able to fund their iron ore expansions out of revenue and will be forced to change their attitude towards export growth.

Mr Lourenco Goncalves new CEO of American miner Cliffs Natural Resources said that “The market had failed to fully appreciate the big capital expenditure bills the miners would face if they went ahead with their expansion plans.”

Mr Goncalves accused the big miners of running a cost plus business model in iron ore, implying they were happy to settle for a slim profit rather than testing what the market was truly willing to pay.

He said that "I have my doubts if the big Australian miners will be able to sustain their huge capex requirements out of the cost-plus business model, or if in a few more quarters their current behaviour toward pricing will not change. In order to do what they are saying they're going to do, they need massive amounts of capex, and that needs to come from their cash generation."

Source – SMH

voda 2 november 2014 15:45

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'Miljardenbod op mijnbouwer Anglo American'

ZONDAG 2 NOVEMBER 2014, 13:21 uur | 747 keer gelezen

LONDEN (AFN) - Voormalig bestuursvoorzitter van mijnbouwgigant Xstrata, Mick Davis, heeft een miljardenbod uitgebracht op onderdelen van mijnbouwer Anglo American. Dat schreef The Sunday Times.

Davis verkocht vorig jaar Xstrata voor 27 miljard dollar (21,6 miljard euro) aan de in Zwitserland gevestigde grondstoffenhandelaar Glencore. Hij richtte vervolgens het bedrijf X2 Resources op om overnames in de mijnbouwsector te doen. Volgens de krant, die zich baseert op ingewijden, wil Davis onder meer koper- en nikkelmijnen van Anglo American kopen en een deel van kolenwinning van het concern.

Davis bracht eerder een vergelijkbaar bod uit op onderdelen van BHP Billiton, maar dat concern koos ervoor om die onderdelen in een apart bedrijf naar de beurs te brengen. Dat bedrijf heeft een waarde van 12 miljard dollar.

voda 10 november 2014 16:30

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Rio Tinto unfazed by falling iron ore prices - CEO

Reuters reported that Global miner Rio Tinto, which gets 92% of its revenue from iron ore, is unfazed by the drop in ore prices and sticking to plans to raise output.

Mr Sam Walsh CEO of Rio Tinto said that the Anglo Australian miner, which rebuffed an approach from commodities trader Glencore Plc in August, is also confident of increasing returns to shareholders at full year results in February adding that it has no plans to cut its 2015 capital spending target of AUD 8 billion.

The spot price of iron ore .IO62-CNI=SI, which traded as high as USD 160 a tonne in Feb 2013, has crashed 40% to hit a five year low of USDD 75. Some analysts expect prices to fall even lower next year as mining majors continue to feed an oversupplied market, even though China is losing economic steam.

But Mr Walsh, who ran Rio Tinto's iron ore business for eight years before taking the top job in 2013, is confident that Rio's production costs of AUD 20.40 a tonne in the first half of 2014, the lowest in the industry, will help it ride out the storm.

He said that "Between me and the current iron ore price there is tier two, tier three and tier four (producers). We have positioned our business to be the lowest cost producer in the world, so I don't think I'll be losing sleep about our iron ore business.

The low production cost had also secured enough margins to materially increase shareholder returns. Rio Tinto is on track to lift output 9% to 290 million tonnes ahead of a push to 360 million tonnes. That ranks the Anglo Australian company number two in size behind Brazil's Vale with BHP a distant third.

Source - Reuters

voda 12 november 2014 17:03

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Rio Tinto CEO defends iron ore expansion

Mr Sam Walsh CEO of Rio Tinto has defended the company’s policy of increasing iron ore production, dismissing the notion that there was collusion between the largest iron companies to over produce and put smaller companies out of business as absolute nonsense.

Mr Walsh said that the expansion plans were made upwards of five years ago. The world’s largest mining companies, including Rio Tinto are adding hundreds of millions of tons of new production capacity to their operations, which has seen a reduction in market prices and has caused smaller companies to struggle.

Mr Colin Barnett state premier of Western Australia last month warned that the World Trade Organization and European trade officials could investigate if the oversupply went on.

Mr Walsh responded, saying that “the projects were fully approved by Premier Barnett, as minister for state development. At the time, his government thought that projects were a good initiative.”

Rio Tinto along with BHP Billiton Limited and Brazil’s Vale SA, have frequently been suggested to be manipulating the iron market with analysts suggesting that simultaneous supply expansion by all three is part of efforts to eliminate competition. All three companies have denied such activities.

Mr Walsh said that “There’s been some comments that we’re doing this to affect others. That’s not true. We’re doing this because it makes sound economic sense for Rio Tinto. We are the lowest-cost producer in the world. If you’re the lowest cost producer, you will be in a particularly privileged position, so we’re continuing to invest on that basis.”

Source – Mining Innovation News

voda 18 november 2014 16:56

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Rio Tinto and Sinosteel extend the Channar Mining iron ore JV

Rio Tinto and Sinosteel Corporation announced their intention to advance discussions for a second extension to the Channar Mining iron ore joint venture in Western Australia’s Pilbara region.

This followed the signing of a Heads of Agreement at Parliament House in Canberra by Mr Sam Walsh CEO of Rio Tinto and Mr Xu Siwei President of Sinosteel Corporation. Mr Xi Jinping President of China and Mr Tony Abbott PM of Australia attended the signing.

Mr Walsh said that “The Channar joint venture was a ground-breaking partnership formed in the early stages of the development of the Chinese steel industry. It’s now one of China’s longest running and most successful partnerships with Australia and a model for economic cooperation between our two countries. The signing demonstrates the commitment by Rio Tinto and Sinosteel to continue exploring opportunities that build on a mutually beneficial partnership that has developed over many years.”

Mr Xu said that “The signing of this agreement is another milestone in 27 years of successful cooperation between Sinosteel and Rio Tinto. As a large international enterprise providing comprehensive services for the Chinese iron and steel industry, Sinosteel is committed to developing broader and deeper cooperation with Rio Tinto.”

The original Channar JV was signed in 1987 and provided for the production of 200 million tonnes of iron ore. It was extended in 2010 to produce a further 50 million tonnes of iron ore.

Source – Strategic Research Institute

voda 18 november 2014 16:59

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BHP Billiton update on Nickel West business

BHP Billiton announced a review of its Western Australian Nickel West business, comprising the Mt Keith, Cliffs and Leinster mines and associated concentrators, the Kalgoorlie smelter, the Kambalda concentrator and the Kwinana refinery.

This review is now complete and the preferred option, the sale of the business, has not been achieved on an acceptable basis. The Company will only pursue options that maximise value for shareholders.

At this time, Nickel West will remain in the BHP Billiton portfolio as a non core asset and the Company will continue to operate the business to realise its full value.

Mr Paul Harvey President of Nickel West Asset said that “The focus of Nickel West will remain on delivering safe and efficient production whilst pursuing every opportunity to maximise productivity, to reduce operating costs and increase free cash flow.”

Source – Strategic Research Institute

voda 19 november 2014 16:57

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BHP Billiton's conservation efforts on the World Stage

Thousands of conservation experts from around the world, including environmental scientists from BHP Billiton, are in Sydney for the 2014 World Parks Congress.

WPC is the preeminent conservation forum and is held every 10 years to share best-practice knowledge in managing protected wilderness areas.

Ms Erika Korosi, BHP Billiton Senior Manager Environment, joined partnership organisations Conservation International, Tasmanian Land Conservancy and The Nature Conservancy to showcase their collaborative approach to conservation projects.

Ms Korosi said that she was excited by the opportunity to share knowledge and outcomes from BHP Billiton’s programs at this globally significant event. To date BHP Billiton has contributed more than USD 30 million for two significant conservation projects, The Five Rivers Reserve Project in Australia and the Valdivian Coastal Reserve Project in Chile, with other opportunities being investigated.”

Ms Korosi said that “The World Parks Congress is held only once every decade, so it’s great to be able to provide an update on our progress and findings. I hope our partnership model acts as an example for what can be achieved through effective collaboration between the private sector and environmental organisations.”

During the WPC, Ms Korosi presented to delegates on BHP Billiton’s world class conservation projects, implemented as part of the Company’s commitment to conserving areas of biodiversity significance globally.

Ms Jennifer Morris, Conservation International Chief Operating Officer, said the innovative global partnership between Conservation International and BHP Billiton had facilitated the conservation and ongoing management of over 60,000 hectares.

Ms Morris said that “BHP Billiton's commitment to protect and finance areas of global significance is truly ground breaking and should be viewed as a model for other companies to follow.”

Mr Mike Henry, BHP Billiton President Health, Safety and Environment, said that he was very proud of BHP Billiton’s innovative approach to environmental management and that it was pleasing to see this being recognised on the world stage.

He Henry that “In addition to the environmental management actions of our Businesses, BHP Billiton has committed to voluntarily finance the conservation and ongoing management of areas of high biodiversity and ecosystem value.”

he said that “We partner with some of the best organisations in the world to make projects of this standard benefit society, for now and in the future. This is above and beyond what we're required to do from an operational perspective. We recognise our broader role in society and the importance of supporting measures to conserve areas of environmental significance.”

Source – Strategic Research Institute

voda 20 november 2014 16:42

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Rio Tinto's new AUD 3.5 billion iron ore mine approved

Western Australia’s environmental authority has approved Rio Tinto’s plan to build a massive new iron ore mine in the Pilbara.

The Koodaideri mine would be located 110 kilometers north west of Newman and is expected to have a 30 year life span.

According to documents filed by Rio subsidiary Mount Bruce Mining, the mine is expected to produce 35 million tonnes of ore a year, before a ramp up by 2030 which will see that figure increase to 70 million tonnes a year.

The mine would require a new 167 kilometer railway to be built in order to connect the mine to Rio’s Dampier Tom Price line. New roads, power sources, water infrastructure and FIFO village facilities would also be need to be constructed.

Up to 2,000 people would be needed to build the mine while 700 workers would be required for the mine's operation. The estimated price tag for the mine and rail development is USD 3.2 billion.

The Environment Protection Authority said that the mine could go ahead subject to 14 conditions including measures to protect local bat and quoll colonies. It also wants to ensure that the mine does not increase the spread of asbestos in the environment.

The proposal is open to a two week public appeals period before being sent to WA’s Minister for Environment Albert Jacob for final approval.

The EPA’s approval comes one the same day as the price for iron ore hit its lowest point in five years. Dropping 4% overnight, the commodity is trading at USD 72.10 per tonne.

However, with a production cost of just over USD 20 per tonne, Rio is shielded from price drops, and plans to expand its exports out of the Pilbara from the current 270 million tonnes a year to 360 million tonnes a year.

Source – Mining Australia

voda 21 november 2014 15:46

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BHP plans shareholder vote on spin off company in May 2015

Reuters reported that BHP Billiton plans to hold a shareholder vote in May 2015 on its plan to spin off its aluminium, coal, manganese and silver assets into a separate company.

The world's biggest miner said that it has won Australian Foreign Investment Review Board and tax office approval for the demerger, is confident of securing remaining regulatory approvals and would release full details of the spin-off company, yet to be named, in March.

Mr Jac Nasser chairman of BHP Billiton said that "We have made very good progress in recent weeks and I am pleased to confirm that the demerger is on track.”

The spin off company, which analysts value at around USD 16 billion, will bundle BHP's aluminium, manganese, Cerro Matoso nickel in Colombia, South African energy coal, some Australian metallurgical coal assets and the Cannington silver, lead and zinc mine.

BHP reiterated that it is working on tests to expand its huge Olympic Dam copper and uranium mine by using heap leach technology to get more out of its underground mine, rather than building an open pit.

Source - Reuters

voda 23 november 2014 15:01

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BHP Billiton plans shareholder vote on proposed spin off in May 2015

BHP Billiton Limited announced that it intends to hold a extraordinary general meeting for shareholder vote in May 2015 on its proposed spin off of its less profitable assets such as aluminium, coal, manganese and silver assets, into a separate public listed company.

Mr Jac Nasser chairman of BHP Billiton revealed this while addressing shareholders during a presentation at the company's Annual General Meeting in Adelaide earlier in the day. The spin off will benefit other areas of its global operations.

BHP noted that regulatory approvals for the proposed multi billion dollar spin off have already been received from the Australian Foreign Investment Review Board and the Australian Taxation Office, while other required approvals are also progressing well. It expects to release of all shareholder documentation including shareholder circular and an information memorandum in March 2015 related to the spin off.

BHP said that it intends primary listing on the Australian Securities Exchange for the spun off company, with secondary listing on the Johannesburg Stock Exchange and standard listing on the UK Listing Authority's Official List and admission to trading on the London Stock Exchange.

BHP noted that creating two portfolios of complementary assets has the potential to unlock shareholder value. The demerger will increase BHP's focus on these four pillars, with potash as a potential fifth, and will be able to more quickly improve the productivity and performance of its largest businesses.

BHP Billiton has been simplifying its portfolio for over a decade and now has 41 assets world wide. The proposed demerger would be a significant step towards focusing on the 19 core Iron Ore, Copper, Coal, Petroleum and Potash assets that generated 96 percent of its underlying EBIT in the 2014 financial year.

Rtt News

voda 24 november 2014 16:29

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BHP Billiton zet mes in investeringen

MAANDAG 24 NOVEMBER 2014, 08:14 uur | 1314 keer gelezen

MELBOURNE (AFN) - Het Australische mijnbouwconcern BHP Billiton zet zijn investeringen de komende jaren op een fors lager pitje. Ook moet het bedrijf de kosten verder omlaag brengen om de stevige prijsdalingen op de grondstoffenmarkt het hoofd te kunnen bieden. Dat heeft topman Andrew Mackenzie maandag gezegd.

De investeringen in het lopende boekjaar, dat nog loopt tot en met juni, zullen uitkomen op 14,2 miljard dollar (11,5 miljard euro), waar het bedrijf eerder nog uitging van 14,8 miljard dollar. Het boekjaar daarna dalen de uitgaven aan projecten en het zoeken naar grondstoffen naar zo'n 13 miljard dollar. In 2012 lagen de investeringen nog op 22,7 miljard dollar.

De afremmende groei van de wereldeconomie heeft de prijzen van grondstoffen, zoals ijzererts, flink onder druk gezet. BHP moet de kosten daaraan aanpassen door efficiënter te werken, aldus Mackenzie.

voda 25 november 2014 16:50

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BHPB announced major steps to cut USD 4 billion costs

BHP Billiton has increased its target for productivity gains within its core portfolio and provided new guidance that highlighted its ability to reduce investment without compromising growth. It also provided updates on its Copper and Coal businesses.

1. BHP Billiton is now targeting USD 4 billion of annualised productivity gains in its core portfolio by the end of the 2017 financial year, a USD 500 million increase on previous guidance.

2. Improved capital productivity will allow planned investment to be reduced from USD14.8 billion to USD14.2 billion in the 2015 financial year and to USD13 billion in the 2016 financial year with no change to expected production growth.

3. In Copper, productivity initiatives including low cost debottlenecking projects are expected to offset grade decline over the medium term.

4. In Coal, we have re-established our competitive advantage by closing high cost capacity and sustainably reducing costs.

BHP Billiton CEO Mr Andrew Mackenzie said "By significantly simplifying the portfolio the proposed demerger will allow us to redesign BHP Billiton and create an organization that supports better productivity. The Group’s core assets generated more than 96% of its operating profit in the 2014 financial year, so we can cut complexity and lower costs without losing the benefits of scale and diversity. Put simply, we can organize a company that operates 12 large, core assets differently to one with 30 operated assets of varying sizes across a broader range of commodities. We can bring senior management closer to the operations, reduce duplication and cut functional costs to maximize shareholder value. By focusing on the productivity of our largest businesses, we can deliver a step change improvement in performance. Since announcing our plans, we have been able to define the potential benefits in more detail. We are now targeting annualised productivity-led gains of at least USD 4 billion within the core portfolio by the end of the 2017 financial year – an increase of USD 500 million on previous guidance. This includes a minimum reduction in cash costs of USD 2.6 billion per annum."

Maximising operating and capital productivity in Copper

The outlook for copper remains strong. Industry production will be increasingly challenged by structural factors including grade decline and higher strip ratios, with the availability of power and water a significant constraint in several countries. This is likely to result in a significant supply deficit by 2018.

BHP Billiton is not immune to these challenges, but the Company is well positioned to respond. Operational performance continues to improve, with unit costs at Escondida expected to fall by 30 per cent in the three years to the end of the 2015 financial year. Meanwhile productivity initiatives, including low cost debottlenecking projects at Escondida, Spence and Olympic Dam, are expected to offset grade decline within the Copper business over the medium term. And longer-term growth projects at Olympic Dam and Spence could support total copper production capacity of well over 2.0 Mtpa with first quartile average C1 costs.

After three years of strong growth at Escondida, production is expected to fall in the 2016 financial year as a result of significant grade decline. This is expected to mark the low point in production for the remainder of the decade. The life extension of the Los Colorados concentrator and the completion of the Water Supply Project in 2017 will allow Escondida to run three concentrators and maintain production for a decade, without the need for any major investment.

Annual capacity at Olympic Dam is expected to increase by approximately 50 kt from the 2018 financial year upon completion of a low cost debottlenecking project, which will also significantly reduce unit costs. Over the longer term, BHP Billiton is evaluating a low-risk underground expansion with significantly lower capital intensity than the previous open cut design. This has the potential to deliver over 450 kt of copper production a year at first quartile C1 costs by the middle of next decade.

Improving productivity and sustainably lowering costs in Coal

In metallurgical coal, high-cost, uneconomic supply has remained resilient although we do expect to see an increasing number of production cuts, particularly in the United States. Given robust underlying demand growth for premium hard coking coals, pricing for our products is likely to be well supported in the medium and longer term.

The thermal coal market remains well supplied, prolonging the weaker pricing environment. While demand from key importing regions remains steady, prices are unlikely to respond until uneconomic supply exits the market.

BHP Billiton’s Coal business has re-established its competitive advantage by closing high-cost capacity and sustainably reducing costs. All of our Coal operations remain cash positive despite the low price environment and are well placed for margin expansion when prices are expected to recover in the medium term.

Productivity in the Coal business has improved significantly in the last two years, with unit costs cut by 37 per cent in metallurgical coal and by 21 per cent in energy coal. The Group is targeting a further 10 per cent reduction in unit costs at Queensland Coal in the 2015 financial year and a 15 per cent decline in unit costs at New South Wales Energy Coal by the end of the 2016 financial year.

Source – Strategic Research Institute

voda 27 november 2014 16:53

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BHP and Rio Tinto were right on iron ore demand but wrong on supply - Mr Russell

Mr Clyde Russell is a Reuters columnist wrote that what was lacking at BHP Billiton's annual meeting was an admission that what has effectively happened with iron ore is that the company's shareholders are subsidizing the profits of Chinese steel mills. Instead, what Chairman Mr Jac Nasser told the media after the AGM on November 20 was iron ore prices were not inconsistent with the expectations we had built into our long-term investment.

Both Mr Nasser and Mr Andrew Mackenzie CEO of BHP Billiton were keen to emphasize the productivity successes at the iron ore business, saying it remains one of BHP's main profit drivers. That may well be true, but the message from the executives at last week's AGM doesn't quite tally with what BHP was saying in 2011, when it was approving the massive expansion of its iron ore operations in Western Australia.

It was around this time that BHP, its Anglo-Australian rival Rio Tinto, newcomer Fortescue Metals Group and top iron ore miner Brazil's Vale were all making decisions to radically boost output of the steel making ingredient.

This unprecedented capacity expansion was based on the two pronged view that China, which buys about two thirds of seaborne iron ore, would continue its rapid growth for decades to come and that low-cost producers would be able to force higher-cost miners from the market. It has turned out somewhat differently from not only BHP, but also what Rio and others expected back in 2011.

Mr Ian Ashby, the former president of BHP's iron ore business, said in March 2012 that Chinese iron ore import demand would by 977 million tonnes by 2015, which looks to be an extremely accurate forecast, given this year's demand is likely to be around 930 million tonnes.

Mr Tony Ottaviano, BHP's vice president for planning, in a presentation in March 2011 said that China's steel demand would be 700 million tonnes by 2015, which actually may turn out to be too conservative, given output in the first 10 months of this year reached 685.3 million tonnes. However, Mr Ottaviano also said that the growth in iron ore capacity faced challenges in what was then a capital constrained environment, and that he expected that "delivered supply will restore market balance. This is where BHP, and the other miners appear to have been wrong, with the new supply additions generally coming on stream, on time and on budget.

Mr Tom Albanese former chief executive of Rio Tinto and current leader Mr Sam Walsh, who was then head of iron ore, were more forthcoming about where they saw the market, saying in November 2011 that seaborne iron ore supply would have to grow 100 million tonnes per annum for the next eight years.

Given that the growth of global iron ore demand has been concentrated in China, it's worth noting that import demand in that country grew 67.8 million tonnes in 2011, 58.6 million in 2012 and 74.8 million in 2013. This year may well be the first year that Chinese iron ore imports have grown by more than 100 million tonnes, assuming this month's and December's maintain the strength seen in the first 10 months. But with China's economy cooling and residential property construction softening, the likelihood of strong growth in iron ore demand in 2015 is weak.

Source - Reuters

voda 27 november 2014 16:53

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BHP Billiton update senior executive changes

Mr Andrew Mackenzie CEO of BHP Billiton announced changes to the Group Management Committee.

Ms Athalie Williams will join the GMC on January 1st 2015 to replace Mr Mike Fraser as President, Human Resources. As announced Mr Mike will become President and Chief Operating Officer Elect Africa of the proposed demerged company.

Ms Athalie is currently Vice President Human Resources, Marketing, having previously worked in HR roles in the Uranium business and in Melbourne where she was instrumental in the early development of the Company’s talent framework. She has been a senior member of the HR leadership team for many years and will relocate from Singapore to Melbourne.

Mr Mackenzie said that “I am pleased to welcome Athalie to her new role as President, Human Resources and to the GMC. Athalie has demonstrated strong leadership at BHP Billiton and she is an exceptional choice to lead the development of our organisation and culture. Mr Mike Fraser will bring to the proposed new company leadership skill and experience developed over many years in BHP Billiton, in a variety of roles in multiple locations and in businesses including Coal and Aluminium.”

Mr Daniel Malchuk, currently President, Aluminium Manganese and Nickel will become President, Copper effective March 1st 2015. Mr Daniel will replace Mr Peter Beaven who, as previously announced, was appointed Chief Financial Officer in October following Graham Kerr’s appointment as Chief Executive Officer Elect of the proposed new company. Mr Daniel will retain responsibility for Nickel West and will relocate from Perth to Santiago, Chile.

Mr Edgar Basto, who has been Acting President, Copper will move to a new senior leadership role which will be announced in due course.

Mr Mackenzie said that “Mr Danny’s strong leadership of the AMN business and his diverse commercial and operational experience will be an asset to Copper. I would like to thank Edgar for his ongoing leadership of Copper and I look forward to continuing to work with Mr Danny as he assumes his new role in March.”

Effective January 1st 2015 Mr Mike Henry will move to the role of President, Coal. He will relocate to Brisbane. Mike joined the GMC in 2011 and is currently President, Health, Safety, Environment, Marketing and Technology. Mr Dean Dalla Valle who is currently President, Coal will relocate to Melbourne and will become President, HSE, Marketing and Technology. These portfolio changes recognise the depth of skill and contribution of both Mike and Dean to BHP Billiton.”

In addition Ms Jane McAloon, President, Governance and Group Company Secretary, has advised of her intention to leave BHP Billiton in July 2015 after a distinguished eight year career including leadership of the Company’s approach to governance strategy and processes. Ms Jane remains critical to the success of the demerger proposal and will remain on the GMC until the completion of the demerger following the Extraordinary General Meetings, expected in May 2015.

Ms Margaret Taylor will join BHP Billiton in the new year as Company Secretary. Margaret has most recently been Group Company Secretary and Head of Group Governance at the Commonwealth Bank of Australia. She was previously Group General Counsel and Company Secretary at Boral and has also worked in BHP Billiton’s Legal group.

Mr Jac Nasser charman of BHP Billiton said that “Mr Jane has made an exceptional contribution to the work of the Board. Her counsel and support have made her a trusted adviser to me and to all of the other members of the Board over many years. Her experience, leadership and commitment to the principles and practices of good governance have been invaluable. While we are sorry to see Jane go we wish her well in the future.”

Source - Strategic Research Institute

voda 27 november 2014 16:57

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BHP Billiton assures dividends will be paid

BHP Billiton reassured investors that billions of dollars of planned capital spending and cost cuts would help allow the world’s biggest miner to maintain dividends as iron ore and crude oil prices fall.

Capital outlays will drop to USD 13 billion in fiscal 2016, down more than 40% from 2012. BHP also increased its annual target for productivity gains by 2017 by USD 500 million.

Mr Andrew Mackenzie CEO of BHP Billiton said that "We are able to drive productivity both in capital and in our operations at a pace that we can more than counteract the impact of price and ensure that our dividend is covered."

Mr Glyn Lawcock analyst of UBS said that “The dividend, its credit rating and select investments had priority over buybacks. The tumbling commodity markets meant investors were seeking assurances over dividend payments and the prospect for additional returns.”

Mr Evan Lucas, markets strategist at IG in Melbourne said that "They are having to really ramp up their productivity drive a lot faster than I believe they were willing to do. They were already looking for a good amount of cost savings, so it shows how much pressure that price is having."

Spending on projects and exploration will be trimmed to AUD 14.2 billion in the 12 months to June, from a previous company estimate of AUD 14.8 billion. The producer allocated AUD 22.7 billion in fiscal 2012.

Mr Mackenzie said that efforts to lower costs in its iron-ore unit have "barely scratched the surface.

The biggest miners are trimming spending after a decade long AUD 623 billion investment spree was followed by asset write downs and management clear outs. Rio Tinto, the second biggest miner, is targeting a further USD 1 billion in savings by the end of next year, after stripping USD 3.2 billion of expenses out since 2012.

BHP rose 3.8% to close at AUD 32.90 in Sydney, the most in almost three years, as Asian miners surged following China’s decision to cut interest rates for the first time since 2012.

Mr Mackenzie said that we always felt that certain interventions would come forward to maintain a decent level of growth in China, so this is pretty much along the lines that we predicted. The producer raised its full year dividend for the 12 months to end June 4% to AUD 1.21 a share, it said in an August filing. Over the past decade, BHP had returned a total of AUD 64bn to shareholders through

He said that "We will strike the right balance between investment in high-return opportunities and returning cash to shareholders."

Source - Bdlive

voda 29 november 2014 16:16

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Rio Tinto on track to deliver sustainable returns to shareholders

Rio Tinto’s transformation into a more streamlined, accountable business is gathering momentum, with a promise for sustainable cash returns to be delivered to shareholders next year.

At an investor seminar in Sydney, Rio Tinto also underlined its commitment to capital discipline and shareholder value, confirming it will focus only on the projects with the highest returns to drive shareholder value. The Group’s world class portfolio of high quality assets, with industry leading EBITDA margins and potential for growth, are positioned to generate strong free cash flow.

Rio Tinto also revealed fresh detail around the compelling investment fundamentals for the expansion of its flagship Australian iron ore operations, with the Pilbara expansion to 360 million tonnes a year delivering an internal rate of return of 40% with a five year payback period.

Reinforcing the focus on productivity and driving value from its iron ore assets in the Pilbara, Rio Tinto today announced deferment of the investment decision on its proposed billion dollar greenfield mine Silvergrass until at least the Q3 of 2015 at the earliest.

However, the originally forecast production the delivery of 330 million tonnes in 2015 and 350 million tonnes by 2017 remains unchanged with the extra production coming from brownfields, debottlenecking and productivity across the Pilbara mine network.

The ramp up to 360 tonnes will create the best value for Rio Tinto shareholders. The iron ore operations are one of the most attractive businesses in the world, not just in the mining sector, but across all industries.

For almost 50 years, the Pilbara assets have produced an average EBITDA margin of 50 per cent and the 360 project positions the business for industry-leading returns over the long term. Shareholders stand to benefit from the very considerable value that this will generate.

Key points from the seminar include:
Financial
1. Total capital expenditure below AUD 8.5 billion forecast for 2014, down 34% YoY.
2. Operating and exploration costs reduced by AUD 5.4 billion by the end of 2015, compared with the 2012 base.
3. Divestments totalling AUD 3.5 billion completed since 2013 as part of the continuous process of reshaping the portfolio.
4. Debt target of mid-teens achieved. Now moving from absolute net debt target to a net gearing ratio-based target range of 20% to 30% to protect investors and provide flexibility.
5. Disciplined allocation of capital to the highest returning projects will drive production growth.

Operational;
1. Pilbara iron ore operations remain the envy of the sector. Expansion to 360 MT per annum delivering IRR of 40% with a five year payback period.
2. Lowest cost iron ore producer in the Pilbara. Committed to driving down all in and cash costs through technology investment and productivity gains.
3. Reshaping the Aluminium business around a portfolio of tier one bauxite operations and first quartile smelters. Bauxite export business expected to deliver EBITDA margins greater than 50% at consensus 2014 to 2019 prices.
4. World class thermal coal assets in Australia, with long-term fundamentals remaining positive and significant increase of Rio Tinto Coal Australia’s managed thermal coal reserves and resources in the Hunter Valley of New South Wales, Australia.
5. Copper business building a tier one portfolio while driving profitability. Cost reductions and productivity improvements driving earnings and moving the business down the cost curve, whilst developing future options to capture expected favourable outlook for copper.
6. Exposure to later cycle commodities among our tier one Diamonds and Minerals assets underline diversified portfolio.
7. Sensible use of industry-leading technology and innovation to deliver real value through ongoing productivity improvements embedded into the operations for the long term.

Mr Sam Walsh CEO of Rio Tinto said that “Our commitment to our shareholders is to deliver sustainable cash returns to shareholders through the cycle. We will deliver this thanks to our superior portfolio of tier one assets, an unrelenting focus on financial discipline and our unquestionable operating and commercial expertise, founded on a culture of safety and integrity.”

Mr Walsh said that “The delivery of our progressive dividend is a key commitment. Looking out over the next five years, we expect to generate strong free cash flow and we remain committed to materially increase cash returns to shareholders in a sustainable way. I look forward to announcing this at our annual results in February next year.”

He said that “We aim to deliver best-in-class returns by operating in the most attractive long term sectors with assets that enable us to be the most competitive in the industry, complemented by a strong balance sheet. Rio Tinto stands apart from its competitors with its strategic approach, well placed to thrive in times of volatility and deliver value and growth through the cycle.”

Source – Strategic Research Institute

voda 30 november 2014 16:33

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Rio Tinto vows big returns despite iron ore rout

Reuters reported that global miner Rio Tinto deferred plans to build AUD 1 billion mine in Australia, stepping up cost cuts amid a plunge in iron ore prices so it can deliver on a vow to boost returns to shareholders.

The move to delay an investment decision on its proposed Silvergrass iron ore mine until at least the Q3 of 2015 follows a 50% slide in iron ore prices this year as Rio and its main rivals have flooded the market with new supply.

Mr Sam Walsh CEO of Rio Tinto while the long term outlook remains sound, the near term is undoubtedly more challenging But was not affecting Rio's promise to raise shareholder returns substantially come February 2015, when the company reports its full year results.

Rio needs to keep shareholders happy in order to ward off a new approach from suitor Glencore Plc, which is widely expected to make another play for the global miner after it was rebuffed in August. Investors have demanded higher returns following a spending binge on overpriced acquisitions and mine expansions over the last seven years.

Mr Walsh said that "We have reduced our cost, we have reduced our debt, we have substantially reduced our capital, and that's put us in an incredibly good position to materially increase shareholder returns."

Source – Reuters

voda 2 december 2014 17:05

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BHP Billiton sees no slowdown in iron ore supply increase

BHP Billiton Limited signaled there will be no slowdown in the drive by global iron ore producers to boost production even as prices slump.

Mr Jimmy Wilson, BHP’s president of iron ore said that “Even the iron ore price where it is today can induce more volume. If that volume doesn’t come from our business, it’s going to come from other businesses around the world and other countries around the world.”

Mr Wilson said that “Organizations have to be competitive and those that can’t be competitive will end up going out of business.”

Mr Wilson said that “When the prices have been so high over such a long period of time you are going to induce more supply and when that supply comes on, we shouldn’t be awfully surprised. This is the commodity cycle.”

BHP operates in the iron rich Pilbara region of Western Australia, the largest production hub for the material in the world. It’s the No. 3 exporter and is spending AUD 2 billion to boost annual production capacity to 290 million tonnes. Iron ore contributes 32% of its sales.

Source - Bloomberg

voda 5 december 2014 16:03

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Rio Tinto boss says on coal set for a comeback

Mr Harry Kenyon-Slaney, Rio Tinto coal boss, said that green shoots are emerging in the thermal coal market after a dire run for more than two years, which has seen prices crash to languish near 6 year lows of about USD 62 a tonne.

Mr Kenyon-Slaney in an interview said that "We are seeing the beginnings of the stabilisation of the market, particularly in respect of price."

He said that "You've started to see a correction in the supply imbalance, in that you've seen supply being taken out of operation. I'm under no illusions – the tough times are going to continue for some time yet. But the cycle will turn."

He added that and for Rio's thermal coal division, an aggressive two years of cost-cutting is allowing the miner "to keep our head above water". He expects at least another year of pain for the Australian industry as the market shakes itself out.

Mr Kenyon-Slaney said that about 200 million tonnes of coal production had fallen out of the global market, including in China, and there were more casualties to come.

He said that "It takes time for the supertanker to turn. But you are seeing signs, I think, of a rational response. "My view is that that has started to provide some stability to what has been a really difficult couple of years."

He added that and in these tough times, for Rio it is about ensuring each individual mine site is cash flow-positive. If any operation slips into the red, a serious review will be run.

Mr Kenyon-Slaney said that "You've seen casualties all round the world. We have to make sure that our operations remain cash flow positive."

Rio has stripped almost USD 30 a tonne from costs across its thermal-coal business over the last two years. "e have positioned our business through the work that we've done to keep our head above water.

Mr Kenyon-Slaney stressed that Rio had the best assets in the Hunter Valley – where the miner is the second-biggest thermal coal producer, behind Glencore. Rio's mines in the region are running at a combined annual production rate of about 35 million tonnes.

At an investor seminar in Sydney last Friday, Rio moved to shore up its case against a joint venture of its Hunter Valley assets with Glencore, saying its assets were of superior quality.

Source - www.smh.com

voda 5 december 2014 21:14

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Rio Chief Says Glencore’s Trading Philosophy Would Hinder Merger

By Jesse Riseborough and Guy Johnson Dec 5, 2014 1:01 AM GMT+0100

“We’re two totally different organizations,” Walsh said in an interview with Bloomberg Television in London. “We’re an organization that’s very focused on the long term. Glencore is a trading company, they’re very short-term in focus. That’s a very different philosophy to us.”

Rio rebuffed a July approach from Glencore to merge the two businesses to create the world’s biggest mining company with a combined market value of about $150 billion. Rio traces its roots to 1873 when it funded the reopening of ancient copper mines on Spain’s Rio Tinto, or red river, while Glencore was founded by commodities trader Marc Rich in 1974.

“Long-term relationships with governments, with customers, suppliers, with our employees, all of that is important to us,” Walsh said. “It’s part of our values, it’s part of the integrity in the way we do business.”

A spokesman for Glencore declined to comment. The company’s trading business benefits from its relationships with customers, giving the group unrivaled market intelligence, CEO Ivan Glasenberg said in August.

Glencore, which trades commodities from oil to cotton as well as mining minerals, said in October it was no longer considering an offer for Rio, effectively barring it from bidding for six months under U.K. takeover rules.

Hedge Funds

A merger of the two is all-but-inevitable, former JPMorgan Chase & Co. dealmaker Ian Hannam told a group of about 20 hedge funds in London last month, according to people familiar with the meeting. Sentiment toward a combination is improving among investors, according to Macquarie Group Ltd.

“At the end of the day it will of course be driven by value, but you need to look at those attributes that I’ve described in terms of how does that generate value,” Walsh said. “Clearly when you consider this there will be a whole raft of things that you look at in terms of our business and their business.”

A question on whether Rio is expecting a renewed approach from Glencore is better directed to their chairman, Tony Hayward, Walsh said.

Rio has cut more than $4 billion in costs since the start of last year and reduced debt by $6 billion in the 12 months through June 30, he said.

The decision to rebuff Glencore’s approach was underpinned by a commitment to the success of its existing strategy of reducing costs and paying out more cash, Chairman Jan du Plessis said in the October statement that confirmed Glencore’s approach three months earlier.

Higher Returns

With commodity prices tumbling, giving more cash to investors is seen as part of Rio’s strategy to bolster support from holders. Speaking to investors in London yesterday, Walsh said he garnered a commitment from Rio’s board last week that it would boost returns next year, an increase he described as “material” and sustainable.

Rio paid out $3.6 billion in dividends last year, up from $3.1 billion in 2012. The company’s key profit driver iron ore has almost halved this year, leading analysts from Macquarie and JPMorgan Chase & Co. to predict Rio may need to take on more debt to fund its dividend next year.

“I suspect there’s some surprises for people in February and I can’t preempt that,” a grinning Walsh said, declining to comment on whether debt would be needed to cover its planned dividend. “Traditionally we’ve made that decision in February. We’re not going to be distracted. We’ll play to our game plan rather than somebody else’s.”

To contact the reporters on this story: Jesse Riseborough in London at jriseborough@bloomberg.net; Guy Johnson in London at gjohnson87@bloomberg.net

To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Randall Hackley

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