Melbourne, Australia — 18 May 2012 – BHP Billiton “’ the world’s biggest miner “’ is likely to delay signing off on at least two mega projects after its chairman put the brakes on an US$80 billion plan to grow the company’s iron ore, copper and energy operations.
Reuters reports that slumping commodity prices and escalating costs have squeezed cash flows, pushing BHP to join rival Rio Tinto in reconsidering the pace of their long-term expansion in countries such as Australia and Canada.
“The major message is: ‘We can’t approve anything right now. We don’t have a spare cent to spend,’” said UBS analyst Glyn Lawcock.
In BHP’s bleakest outlook yet, chairman Jacques Nasser said the company expected commodity markets to deteriorate further, and that investors had lost confidence in the longer-term health of the global economy.
Nasser stopped short of announcing a spending cut, but said BHP was re-thinking its expansion plans every day and that the company would not spend US$80 billion over five years as outlined by chief executive Marius Kloppers in 2011.
The miner was planning to finance the expansion with its cash flows, which analysts forecast may fall 20 % to around $24 billion in the year ending 30 June.
BHP has long maintained that it is committed to keeping its single-A credit rating, another constraint on spending. As of December, the company had net debt of US$21.5 billion.
Three projects are vulnerable: the Outer Harbour development at Port Hedland in Western Australia, crucial to its iron ore growth; the expansion of the Olympic Dam copper and uranium mine in South Australia, and the Jansen potash project in Canada.
Source: Reuters. For more information, click here.