BHP talks up growth amid another Elliott assault

BHP's Andrew Mackenzie

BHP chief executive officer Andrew McKenzie believes the foundation has been set to grow the company by up to 50 per cent.

Speaking at the Bank of America Merrill Lynch Global Metals, Mining & Steel Conference, McKenzie said a year ago, at the same event, he outlined ambitious plans to improve returns and grow the value of the company.

“Since that time, we have made consistent progress and we are confident that continued delivery of these plans, from our stronger base today, could grow the value of our company by up to 50 per cent and almost double the return on capital,” McKenzie said.

McKenzie highlighted several key contributors that were guiding BHP’s growth, such as cost reductions that support a 10 per cent lift in value as the company leverages a simple portfolio, standardised systems and greater connectivity to improve safety and productivity.

Other value adding contributors he mentioned included the release of more latent capacity across the company’s portfolio, advances in the operating capability and capital productivity of its shale assets, the above average returns of its growth projects, its petroleum exploration program, and technology initiatives that improve safety, lower costs and unlock resources.

“We have achieved a great deal over the past year but we are not standing still. Our roadmap today contains an enhanced set of opportunities that will see us prosper and grow value per share throughout the cycle, and in multiple price scenarios,” McKenzie said.

“Above all, we will remain disciplined, and drive consistent and transparent application of our capital allocation framework, which includes cash returns to shareholders. Our path is deliberate, with value and returns at the centre of everything we do.”

Despite BHP’s growth path, hedge fund Elliott Associates, which owns about four per cent of BHP through its London listing, has launched a fresh assault on the miner’s performance.

In April, the US-based hedge fund urged BHP to change its dual-listed company structure, asset portfolio and capital management.

It suggested BHP should operate as a London-based and -listed company, while also demerging its US petroleum assets into a separate entity listed in New York.

Elliott is now asking for an independent review of BHP’s petroleum business with full disclosure of the results.

“We recognise that there are a number of obvious possible solutions to unlock the latent value of BHP’s petroleum business, including a sale or demerger of the US petroleum business and a sale or ASX listing for the Australian and other remaining petroleum assets,” Elliott said in a statement.

“Our preferred approach is a full or partial demerger of the petroleum business, but in any event the logical next step to unlock optimal value from that business is the strategic review which shareholders have every right to expect.”

Elliott has, however, softened its view on BHP needing to restructure, saying it was now open to the company retaining its dual listing in London and Australia.

BHP earlier this week launched a $10 million rebranding campaign, Think Big, where it dropped Billiton from its name after 16 years.