‘Amazing’ Indian Sales as BHP Feels Rising Industry Costs

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Researched by Industrial Info Resources (Sugar Land, Texas) -- At a briefing in Melbourne, Australia BHP Billiton’s (NYSE:BHP) (Melbourne, Australia) incoming chief executive Marius Kloppers said that the company’s sales to India today were higher than those to China six years ago when the Chinese started out on their insatiable growth path. He told the briefing, “We are selling more in volumes to India now than we sold to China and that is a pretty amazing thing.”

India had a large energy shortage, but was largely self sufficient in iron ore and bauxite. “India is going to drive our energy business more and our metallurgical business more. India will continue to drive the base metals and nickel business but less so the iron ore business, for example,” said Kloppers.

Kloppers ruled out selling uranium to India without all the agreements affecting the sale in place. This follows Australian Prime Minister John Howard’s decision to allow uranium exports to India subject to several conditions. “We only sell to countries or try to market our product to countries where they have all the agreements in place,” said Kloppers.

Although BHP posted a net profit of $13.416 billion for the 12 months to the end of June, 28.4 per cent higher than the previous financial year, it was not immune to rising industry costs, reported Industry Search. For example the budget for two of its petroleum development s in the Gulf of Mexico – Atlantis South and Neptune had risen, meaning that BHP would have to spend an additional $270 million to complete the projects.

Kloppers said that BHP would not escape the costs of a buoyant market in the future. “ I describe it as - ’ we eat our own dog food’ – which means that many of the things we produce we also consume, energy, steel, stainless steel materials, reductants and so on,” he said.

BHP was still some time away from giving the green light to expansion at the Olympic Dam copper and Uranium mine in South Australia which is the countries largest underground mine. The project had a significant increase to its resource base, which would be reported after more drilling and development. Kloppers said that the company had not finalized how it wanted to develop the asset, which was in the pre-feasibility stage, and the full feasibility process could take a year or two.

The company will invest in iron ore, coking coal and the Escondida copper mine in Chile. Kloppers said it would invest in ramping up its iron ore capacity and more mines in the Bowen Basin and possibly a new concentrator at Escondida. There was also a plan to invest in Canadian potash. The BHP investment program was across a very wide range of products and a very wide range of geographies, he said.

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