More evidence that the mining/commodity boom has crested.
The new CEO of global mining giant BHP Billiton, Andrew Mackenzie, tells WSJ that he plans to cut investment spending “quite significantly” and be more diligent about returning cash to shareholders.
That BHP had plans to cut capital expenditures was known, however the interview sheds some light on the company’s strategy.
“If a project, geography or commodity doesn’t offer the right returns we will redirect our capital elsewhere or we simply won’t invest. That will obviously create an opportunity to have more capital returned to shareholders and that is the balance that I’m very concerned to get right,” he said from Spain ahead of a presentation at a mining conference Tuesday.
As for what BHP will be investing in:
Future investment will target four pillars: petroleum, copper, iron ore, and steelmaking metallurgical coal. BHP is still considering a fifth pillar and has yet to decide whether to proceed with the $10 billion-plus Jansen potash mining project in Canada, Mr. Mackenzie said. BHP became a large U.S. shale oil and gas player with the acquisition of almost $17 billion of producing and exploration assets in 2011, but a year later said it was writing down the value of part of the business by $2.84 billion due to slumping U.S. natural gas prices. Mr. Mackenzie said shale business remains a strong contender for BHP’s reduced investment going forward.
As it is, the end of the commodity super-cycle has caused a big spike in bearishness towards the aussie dollar, which is increasingly become a big short target. The fact that BHP’s next big areas are potash (in Canada) and shale (in the US) underline that the natural resource centre of gravity is moving slightly west.