BHP chief vows to press ahead despite price rout

Andrew Mackenzie, CEO of BHP Billiton, has vowed to push ahead with plans to boost production of the company's four key commodities, despite the persistent decline in prices across the board.

Speaking at the Bank of America Merrill Lynch 2016 metals conference, Mackenzie said that thanks to a series of latent capacity projects – and with very little outlay – the company could add more than 10% to its current annual production.

Following the demerger of South32, BHP focuses on copper in South America and Australia, oil in North America and coal and iron ore in Australia.

"Our relentless focus on productivity could also release over 1Mt of copper equivalent latent capacity at a total capital cost of less than US$1.5bn," Mackenzie said.

In the case of the firm's copper business, he said that following completion of the third concentrator and desalination plant at Escondida (pictured), and with the three concentrators operating in unison, it could add 150,000t/y over the next decade.

At its Olympic Dam in Australia, BHP could grow annual production to 230,000t with existing surface facilities and without major capital, and to 280,000t/y with "efficient investment underground in the southern mine area."

At Chile's Spence mine, the Spence recovery optimization project, which involves boosting efficiency, and other measures, production could grow to 200,000t before development of the Spence Growth Option project, currently in the feasibility phase.

The Spence Growth Option is one of BHP's key future projects. The company board is scheduled to review its approval toward the end of 2017. Mackenzie said that capital cost is now expected to be less than US$2.2bn, 30% below preliminary estimates.

EXPLORATION POTENTIAL

He said the company has continued to carry out exploration work across its key commodities. Mackenzie said BHP sees exploration "as an important counter-cyclical investment to enhance our copper and oil reserves."

In the case of copper, BHP is investing US$100mn a year to advance greenfield opportunities. In its current fiscal year it has added over 102,000ha in Peru and 41,000ha in the US.

"These regions are well endowed with copper and continue to offer huge potential," Mackenzie said.

Mackenzie said that despite the market being oversupplied and a cautious sentiment, he remains confident about the company's portfolio of commodities. "We're not merely waiting for commodity prices to recover to grow shareholder value," he said.