- Biggest miner to lift annual spending by more than a quarter
- Competitors including Rio Tinto also prioritizing copper
BHP Billiton Ltd., the world’s biggest miner, will raise its annual exploration budget by more than a quarter to $900 million as it targets discoveries in copper and conventional petroleum.
The Melbourne-based producer is allocating more capital to hunt for potential discoveries in the two materials, it said Monday in a presentation. That’s even as it cuts overall capital expenditure to $5 billion in the year beginning next month, compared to a peak of $25 billion in fiscal 2013. BHP in February estimated exploration spending in the current fiscal year would account for $700 million of its forecast $7 billion capital expenditure.
Mining companies, including Anglo American Plc, have trimmed exploration budgets amid wider efforts to lower costs and strengthen balance sheets following a commodities slump that’s eroded profits. Industrywide, annual spending on mineral exploration has slumped to almost $5 billion from a peak of about $20 billion in 2012, Rio Tinto Group said in a presentation Monday.
“We are investing at a time when most in our sector continue to reduce discretionary spend,” Laura Tyler, BHP’s head of geoscience, told a Citigroup Inc. conference Monday in Sydney, according to statement released by the company.
Signs that prices may be approaching a bottom have encouraged producers including London-based Rio to prepare for future growth, authorizing investments in bauxite to copper projects. Citigroup Inc. said last month commodities had turned the corner, while the Bloomberg Commodity Index, a gauge of returns on 22 raw materials, has rallied 19 percent since it plunged in January to a record low.
Rio spent 66 percent of its $576 million exploration budget in 2015 on a search for copper and is exploring for eight different commodities in 17 counties, Stephen McIntosh, the producer’s group executive for growth and innovation said in the presentation to the Citigroup conference.
BHP’s petroleum program will focus on deep water basins in the Gulf of Mexico, the Caribbean and the Northern Beagle sub-basin off the coast of Western Australia, according to Tyler. Copper exploration is being targeted at at sites in Chile, Peru, Canada, Australia and the south-west of the U.S., she said.