BHP warns of US-China trade war ‘jolt’
BHP chief Andrew Mackenzie says countries outside the global trade dispute will be forced into action.
BHP chief Andrew Mackenzie has lobbed a warning on the effects of the US-China trade war, saying “the current assault on the global trading system will jolt countries outside of this dispute into action.”
“This is not a time for complacency,” Mr Mackenzie said. “When the fabric of global trade frays, we must pull together and administer needle and thread.”
The mining boss said BHP continued to monitor market volatility triggered by trade tensions, which in August led it to cut its global growth forecasts by next year by 0.25 per cent.
“Though we have not seen a material impact on our business, we remain cautious in the near term,” he said.
It came as Mr Mackenzie declared water sustainability and carbon emissions were “the biggest challenges humankind now faces”.
Speaking at the company’s annual general meeting in London last night, he said BHP “stands ready to show leadership on both fronts”.
“We remain dedicated to our target of net zero greenhouse gas emissions across our operations by the second half of this century,” he said.
At the meeting, BHP chairman Ken MacKenzie said the company’s conventional petroleum unit needs to continue to earn its place in the mining giant’s portfolio in the wake of the $US10.8 billion ($15.1bn) US onshore shale business.
The BHP chairman said conventional petroleum, which some analysts and investors from time to time have urged selling, remained an important part of the portfolio.
“We believe it is an attractive business for our shareholders, and our strong operating capability benchmarks well against our peers,” Mr MacKenzie said. “In short, conventional petroleum passes the test but, like any other business, it must continue to earn its place.”
In recent conversations with London analysts, Mr MacKenzie reportedly said that to earn its place, the petroleum unit needed to replace reserves with discoveries, something it has not done in the past decade but where there has been recent progress.
He said proceeds from the $US10.8bn shale sale would be returned so shareholders “by the end of the year, or early in calendar year 2019.”
His comments came after BHP earlier on Wednesday cut full-year copper production guidance after an acid plant outage at the Olympic Dam mine in South Australia and a fire at its Spence mine in Chile.
But the big miner largely met expectations in its first-quarter production report released yesterday and said it had made more oil and gas discoveries in the US Gulf of Mexico and off Trinidad and Tobago.
CEO Mr Mackenzie said: “We delivered a 2 per cent increase in copper equivalent production (BHP’s measure of production across all commodities) despite maintenance at a number of our operations. In petroleum, we have extended our exploration success and encountered hydrocarbons in three wells.”
In its September quarter report BHP said it had cut copper production by about 50,000 tonnes to between 1.62 million and 1.705 million tonnes, from previous guidance of between 1.675 and 1.77 million tonnes.
At Olympic Dam, where BHP has been struggling to get consistent results and has issued regular guidance downgrades in recent years, full-year output of between 170,000 and 180,000 tonnes is now expected.
This is down from previous expectations of between 200,000 and 220,000 tonnes because of problems at the acid plant.
“Surface operations are expected to recommence at the end of October 2018 and ramp up to full capacity during November 2018,” BHP said. “Underground operations have been unaffected.”
At Spence, guidance has been cut to between 160,000 and 175,000 tonnes, from earlier forecasts of 185,000 to 200,000.
BHP reported good news from the Samurai well in the Gulf of Mexico, which is drilling near a successful exploration well known as Wildling that is a potential new development.
“The Samurai-2 exploration well encountered hydrocarbons in multiple horizons not previously observed by the Wildling-2 exploration well,” BHP said.
BHP shares slipped 24c, or 0.7 per cent, yesterday to $33.66, underperforming Rio Tinto, which fell 0.2 per cent, and the ASX 200 materials index, which slipped 0.3 per cent.