BHP announces increase in exploration

BHP is turning its eye towards future growth as it announces a renewed focus on exploration.

Speaking at the Bank of America Merrill Lynch conference yesterday, BHP head Andrew Mackenzie outlined the miner’s focus on strengthening its assets and taking proactive action to build now for future commodity strength.

“Although we remain confident in the long term outlook for commodities, we are not waiting for prices to recover. We have everything we need in our portfolio right now to significantly increase the value of the company,” he said.

Part of this value add will be through increased exploration and identification of new potential assets.

“We are increasing our exploration activity to take advantage of falling costs as others pull back,” Mackenzie stated, marking the current trend across the industry to slash exploration budgets as a cost saving measure.

“We have embarked upon one of our most significant oil exploration programs, accelerating activity in our three priority basins,” he said.

“Following the positive exploration results at Shenzi North, we plan to drill a further exploration well (Caicos) in July 2016 on our nearby Green Canyon 564 lease. We will also increase the number of copper targets we test this year by 38 per cent.

“We have established a new global technology function to implement integrated programs to unlock resources and lower costs. We have opportunities identified at a number of our major assets that we expect to create significant value over time.”

This focus on exploration comes only days after the Australian Government announced its intention to support resources exploration in the country, allocating more than $100 million to the industry over the next four years.

The miner also plans to invest in its existing assets as overall unit costs fall.

“We will also invest in projects to unlock the latent capacity of our assets,” Mackenzie said.

“These could add over one million tonnes of copper equivalent capacity at a total capital cost of less than US$1.5 billion. This is equivalent to more than 10 per cent of BHP Billiton’s total current production. We will also maximise the value of our high quality shale assets in a disciplined manner as prices recover.

“Our quality portfolio of tier 1 assets offers attractive medium-term growth options. We have identified and quantified quality growth projects in oil and copper, with investment decisions on the Mad Dog 2 and Spence projects expected within 18 months.”

He went on to say the focus is on growing the business, adding that, “We have the financial strength and the flexibility to pursue a diverse range of opportunities and grow value per share at all points in the cycle, and we have a clear and simple strategy in place to deliver that growth.”


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