Global resources giant BHP Billiton’s chairperson, Don Argus, said on Thursday that as a standalone company BHP Billiton is in a strong financial and operating position.
“We believe we are better placed than our competitors in these challenging times to respond to the fluctuating demand for our products,” he said.
Referring to the decision not to proceed with the acquisition of Rio Tinto, Argus said it was a difficult decision but one he believes is right for BHP Billiton shareholders.
Argus added that BHP Billiton has a portfolio of long-life, low-cost, expandable, tier-one assets.
“As a result of this portfolio, and low-cost position, BHP Billiton’s margins are the highest among the industry and in these difficult times, we expect to outperform our peers,” he said.
It also has a very strong balance sheet, with a net debt level of just $6,3-billion on 31 October 2008 against a market capitalisation of around $115-billion, as well as robust cash flows to support investments through the commodity cycle, he noted.
“These two elements give us the flexibility in these volatile times to respond to any changes in business activity as considered necessary by your management team and board, and we can continue to invest for future growth in shareholder value,” he said.
Argus added that for now, in developing its projects, the group’s emphasis is on lower risk brown-field expansions “in areas we know”, rather than start-up projects in new geographies.
“Our recent announcement of an investment of $4,8-billion in Western Australian Iron Ore to increase our tonnes to 205 million per annum by 2011 is evidence of this confidence in the future and our on-going investment in brown-field sites in known geographies.”
He said that there is no doubt that these are challenging times “for all of us”.
“Uncertainty in the world’s commodity markets remains particularly high in the short-term, and we do not expect to be immune from these changes. However, we have excellent customer relationships and so far we have been able to substantially maintain our sales volumes through a combination of our normal long-term contract and spot business.
“If these uncertain conditions persist and significant production cuts become necessary, or any of our operations are cash negative and are set to remain so, we will respond accordingly and advise shareholders and the market,” he said.
In conclusion Argus said BHP Billiton is very well placed for the current environment.
“Our priorities for cash flows remain to invest in core businesses, manage our balance sheet to a solid single A credit rating, maintain our progressive dividend policy and return any surplus cash to shareholders.
“You have a first-class senior management team led by our chief executive officer Marius Kloppers. They are disciplined and focused on the pursuit of shareholder value and on your behalf I thank them for their leadership and excellent stewardship of BHP Billiton over the past year,” he said. — I-Net Bridge