BHP’s CEO Kloppers Has M&A on List Even After Investment Pledge

BHP Billiton Ltd. Chief Executive Officer Marius Kloppers said he’s still interested in takeovers even after setting aside $80 billion for BHP’s own projects.

Regulatory concerns are impeding iron-ore acquisitions by the world’s largest mining company, though BHP’s potash, copper, and oil and gas businesses aren’t constrained in the same way, Kloppers told the Australian Broadcasting Corp.

Reporting record first-half profit, Kloppers last week unveiled a program to develop BHP’s mines and oil fields after three investments totaling more than $100 billion were knocked back in the past four years. He said on yesterday’s program that while surging commodity prices have led to some “very high” asset valuations, those conditions may not last.

“Cycles change,” Kloppers said on the ABC’s “Inside Business” program. “In six months’ time or a year’s time, something else may come up. The oil and gas market is a very large one where there may be opportunities going forward.”

Kloppers, after failing last year to buy Potash Corp. of Saskatchewan Inc., said his view that asking prices are inflated is based on “prevailing prices that we see today.” Mining takeovers reached a near-record $144.5 billion in 2010, according to data compiled by Bloomberg, pushing up sellers’ expectations.

BHP stock has gained 22 percent in the past six months and closed at A$46.56 on Feb. 18, valuing the Melbourne-based company at A$240 billion. The benchmark S&P/ASX 200 index climbed 11 percent in the same period.

Profit Forecasts

Metal prices in London almost doubled in the past two years as the global economy rebounded. In the last three months alone, the LMEX London Metals Index of six metals including copper, aluminum and lead has surged 18 percent.

BHP has $16.1 billion of cash on hand, it said Feb. 16. The company is expected to generate net income of $21.7 billion for the year ending June 2011, according to the average of 17 analysts estimates compiled by Bloomberg.

Anadarko Petroleum Corp., the Texas oil company with a market value of $40 billion, and Woodside Petroleum Ltd., the Australian oil and gas producer valued on the stock exchange at A$33 billion, have been named as possible targets for BHP.

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

‘Very Good’

Supply, rather than demand, is dictating the price of some BHP products, Kloppers told Inside Business. India isn’t exporting iron ore and during the financial crisis many companies shelved investments to expand production capacity, he said.

The outlook for some BHP products, particularly iron ore, “looks very, very good” over the next nine months, he said.

“Over the next 12, 18 months, perhaps two years, there’s not a substantial amount of new capacity coming on,” Kloppers told the program. “I feel very comfortable we’re going to have healthy margins.”

Rio Tinto Group, the world’s third-largest mining company, on Feb. 14 forecast high copper prices will continue amid rising demand. The global copper supply deficit will reach 822,000 metric tons in 2011, more than double last year’s shortfall, Barclays Capital said on Jan. 20.

Demand for iron ore, copper and aluminum is expected to double in the next 15 to 20 years, Harry Kenyon-Slaney, Rio Tinto’s chief executive officer of the diamonds and minerals unit, said Feb. 8.

To contact the reporter on this story: Angus Whitley in Sydney at awhitley1@bloomberg.net

To contact the editor responsible for this story: Paul Tighe at ptighe@bloomberg.net

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