BHP still bullish on China growth

MINING giant BHP Billiton is confident about Chinese growth despite acknowledging there could be a bumpy ride ahead.

BHP Chief executive Andrew Mackenzie announcing profit results in Melbourne. Picture: Geraghty David

MINING giant BHP Billiton is confident about Chinese growth despite acknowledging there could be a bumpy ride ahead.

The world's largest mining company is looking to spin off some of its assets and earn back the trust of investors who were unhappy about it ploughing profits into marginal projects.

Chief executive Andrew Mackenzie said there was a long road ahead for companies involved in China as the middle class grew to a level which would drive commodity demand.

“There's always going to be some bumps in the road but our assessment would be that it's steady as she goes and that the opportunities for us across all of our portfolio for China as a growing market remain,” Mr Mackenzie told a mining conference in Miami.

“Most of us think about China in the long term and we have a massive journey to undertake to go through the middle income barrier.”

China's infrastructure spending is slowing as growth in the world's second-largest economy decelerates, but leaders in Beijing say they want to wean the country off investment and shift the focus to consumer spending.

Mr Mackenzie said a recent gap in valuations reflected a “bit of a breakdown of trust” which had opened up between the company and investors due to a feeling that cash which should have been returned was overinvested in the business.

During his speech to investors, Mr Mackenzie said the company was looking at which assets could be spun off to simplify the its global portfolio which includes prized iron ore assets.

“We continue to study the next phase of simplification, including structural options, but no decisions have been made yet,” he said.

“Value is our priority and we will get this right.”

Simplification allowed the company to focus as it aims to shrink its portfolio.

BHP recently completed the sale of its West Musgrave nickel project in Western Australia to Cassini Resources amid speculation it could be planning to set up a separate $20 billion company comprising its aluminium, bauxite and nickel assets following weakness in the sectors.

The company also retained its full year guidance for iron ore of 217 million tonnes and metallurgical coal production of 43.5 million tonnes.