By Lilly Vitorovich
(Australian Associated Press)
The boss of BHP Billiton is confident that the resources behemoth can boost its value by more than 70 per cent, even without a significant recovery in commodity prices.
Chief executive Andrew Mackenzie told a mining conference in Miami that productivity and latent capacity are among the things in BHP’s favour.
“We are not merely waiting for prices to recover. We have a diverse range of opportunities in the portfolio today and the financial strength and flexibility to pursue them,” Mr Mackenzie said.
Mr Mackenzie, who has been at the helm of BHP since May 2013, didn’t provide a timeframe for the value forecast.
BHP shares have lost more than half their value since March, 2011, falling from above $42 since the wind-down of the mining boom.
Mr Mackenzie said a strategy of safe productivity and quality commodities assets are preserving margins and building cash flow.
“In the next financial year, we could expect to generate, at early April spot prices and foreign exchange rates, free cash flow in excess of $US5 billion ($A6.79 billion) dollars,” he said.
BHP’s capital allocation framework prioritised asset integrity, balance sheet strength and then a minimum dividend payment, Mr Mackenzie said at the Bank of America Merrill Lynch 2016 global metals, mining and steel conference.
In a note released after the speech, UBS analysts said BHP is well positioned to “positively surprise” from cost savings and productivity.
UBS said the benefits of BHP’s February corporate restructure had been potentially underestimated by the market.
BHP competes against a raft of resource and oil companies, including Rio Tinto, Vale and Fortescue Metals, Woodside Petroleum, Shell and ExxonMobil.
“In our opinion, the majority of the latent capacity is already discounted by the market and a large part of the upside from Onshore is price dependent,” UBS said.
BHP last month cut its iron ore production target for the second time in three months, which could boost iron ore prices.
The company expects to produce 229 million tonnes of iron ore in the financial year ending June 30, down from its previous target of 237 million tonnes, after bad weather and rail maintenance work affected operations in Western Australia.
The group had already reduced its target by 10 million tonnes in February following the suspension of operations at the Samarco joint venture mine in Brazil following a fatal dam collapse.
At 1254 AEST, BHP shares were up 71 cents, or 3.98 per cent, to $18.54 following Mr Mackenzie’s bullish commentary and higher oil prices overnight.