BHP Damps M&A Talk, Spending $80 Billion on Mines

BHP Billiton Ltd., the world’s largest mining company, damped talk that it’s looking to make major acquisitions, instead committing to spend $80 billion to expand and develop its own mines and oil fields.

“As one looks at a buy versus build equation, the clear opportunity for us is to invest money in our own portfolio,” Chief Executive Officer Marius Kloppers, 48, said on a conference call today. Anadarko Petroleum Corp. and Woodside Petroleum Ltd. have been named as possible targets for BHP.

Investor and regulator concern helped sink three investments proposed by Kloppers in the past four years worth more than $100 billion, including last year’s offer for Potash Corp. of Saskatchewan Inc. BHP, which today reported record first-half profit, earmarked the capital spending for iron ore, oil and natural gas, coking coal and copper projects.

“They probably are going to be less aggressive in their acquisitive trail in comparison to where they had been previously,” Jamie Spiteri, head dealer at Shaw Stockbroking Ltd. in Sydney, said by phone today. “They’ve been unsuccessful in recent years acquiring very big assets and there’s been a lot of corporate and political sensitivity.”

BHP declined 1.6 percent to A$46.59 at the 4:10 p.m. Sydney time close after reporting a 72 percent gain in first- half profit to $10.5 billion. Its first-half dividend of 46 cents, up from 42 cents a year earlier, missed a projected dividend of 48 cents, according to data compiled by Bloomberg.

Flat Dividend

The stock may be down today because “the strength in the Australian dollar with respect to the U.S. currency has meant that, in effect, the dividend in Australian dollar terms is flat,” Peter Rudd, mining and resources research manager at Armytage Private Ltd., said on Bloomberg TV today.

Kloppers’ growth strategy partly echoes that of counterpart Roger Agnelli at Vale SA, the world’s largest iron ore exporter. He’s spending $24 billion on organic growth this year and has said Rio de Janeiro-based Vale’s not going after acquisitions. BHP is spending $15 billion this year on projects.

“They have plenty on their plate in terms of organic growth,” Armytage’s Rudd said in an interview with Rishaad Salamat on Bloomberg Television’s “On The Move Asia.” “Asset prices have gone up quite substantially in a number of different areas now. So they now need to pay on any acquisition close to top dollar.”

Mining takeovers reached the second-highest value on record last year, worth $144.5 billion, according to data compiled by Bloomberg. Metal prices in London have almost doubled in the past two years as the global economy rebounded.

Further Investments

The company today expanded its existing share buyback program to $10 billion, from $4.2 billion in November. That was higher than a forecast $5 billion increase by Citigroup Inc. and met UBS AG’s expectations.

BHP plans to spend the $80 billion by the end of the 2015 financial year and expects to approve investments in coking coal and iron ore, Kloppers said today on an analyst and investor conference call. BHP is also studying an expansion of the Olympic Dam mine in South Australia that would transform the site into the world’s fourth-largest copper and gold operation.

“There is robust, ongoing volume growth as we look forward and as these projects move through execution,” Kloppers said on the call with investors.

Anadarko surpassed a two-year high in New York trading in December after The Daily Mail reported BHP may make a $90-a- share bid. Woodside and closely held coal producer Drummond Co. were other possible targets, UBS said in November. BHP is considering takeovers in the energy industry, J. Michael Yeager, CEO of the company’s oil and gas division, said in September.

Massive Bodies

BHP doesn’t want “higher leverage, second-tier or below asset type acquisitions,” Kloppers said.

“Our strategy is to expand massive ore bodies over time and we feel that’s where we allocate capital,” he said. “That does not rule out acquisitions” of smaller projects that can be joined into bigger projects, he said, citing BHP’s C$341 million ($345 million) takeover of Athabasca Potash Inc. in January 2010 which had a project adjacent to its own Jansen development.

To contact the reporter on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net.

To contact the editor responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net.

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