The only deal the company has been able to do of late “for value” was a stake in the Trion offshore oil project, he said. Trion’s development costs may exceed $10 billion with first production expected between 2023 and 2025, Macquarie Group Ltd. analysts wrote Dec. 6. Mackenzie will travel to Mexico to sign the Trion deal on Friday. Asked if BHP will be able to cut the cost of the project or speed up development, he said “we’re certainly going to try.”
Investors remain wary of the prospect of a wave of major deal-making among top miners, after the spree at the start of this decade that led to humbling writedowns and the ouster of a slew of key executives. BHP spent $20 billion expanding into U.S. shale assets and was later forced to write down the value of the assets as prices slumped.
Under Mackenzie’s predecessor, BHP launched an unsuccessful hostile takeover offer for Potash Corp. of Saskatchewan Inc. and previously had failed in an attempted takeover of Rio Tinto Group and a separate plan for an iron ore joint venture with its rival.
On the possibility he’d revisit a large corporate merger, Mackenzie said: “To be honest, I do think about that a bit, but I think that’s very, very low down our list of priorities.”
BHP can achieve its goals with its existing ore bodies and successful exploration, he added.
In the meantime, the company may continue to divest smaller marginal assets, he said, while declining to comment on which ones, or whether any active processes are under way.
"Our portfolio is close to perfection,” he said.
BHP -- which focused its portfolio on key commodities with the 2015 de-merger of other assets into South32 -- is prioritizing copper, oil and potentially potash for investments or acquisitions, even as iron ore and coal account for almost two-thirds of profits. The copper and petroleum divisions will account for about three-quarters of capital expenditure over the next five years, according to Macquarie Group Ltd. forecasts.
A reduction in capex is “broadly” a sign of the direction the company is headed but it will continue to produce coal and iron ore into the next decade, Mackenzie stressed.
“Ten years from now, who knows, but I don’t think you will see a huge shift from where we are today and we may, by then, have chosen to add potash,” he said.
BHP’s Jansen potash project in Saskatchewan may begin first production from as soon as about 2023, people with knowledge of the plans said in August.
This article was provided by Bloomberg News.