BHP Billiton Doubles Capex for 2017, Wary of Protectionist Talk

---

Researched by Industrial Info Resources (Sugar Land, Texas)--Despite concerns over politically driven economic uncertainty, BHP Billiton plc (NYSE:BHP) (Melbourne, Australia), the world's largest mining company by market value, benefited from rising commodity prices and strong results from its copper operations as 2016 came to a close. But executives warned that much of this progress could be undone by rising protectionist attitudes in Western countries. Industrial Info is tracking $14.67 billion in active projects involving BHP, including those in Chile, Saskatchewan and the Gulf of Mexico that were cited as particularly productive.

Net profits were reported to be $3.2 billion in second-half 2016, compared with a $5.67 billion loss in the same period in the previous year; revenues increased 20% to $18.8 billion. Second-half 2015's results were weighed down by low commodity prices, particularly oil, coal and iron ore. But higher demand in China, due in part to production cuts at Chinese mines, and elsewhere led to increases in coal and iron ore prices in second-half 2016, nourishing BHP's bottom line.

Many of President Donald Trump's policy stances have excited leading mining companies, particularly his vow to scale back regulations and boost infrastructure spending, which would increase demand for commodities. But Andrew Mackenzie, the chief executive officer of BHP, expressed concern that the administration's protectionist rhetoric could hinder growth in the longer term. China, a frequent Trump target, is the leading global buyer of commodities such as iron ore, and barriers to trade could more than offset whatever gains are made from reduced taxes and oversight.

"Whilst there may be some short-term winners from some policies of protection and increased trade wars, most of us will be losers, and certainly the future demand for our products could potentially suffer if that were to spread," Mackenzie said in an earnings conference call. BHP expects China's economic growth to moderate in the coming year.

Nonetheless, capital and exploration expenditures are now expected to be $5.6 billion for 2017 and $6.3 billion for 2018, following successful bids and optimism over near-term development in areas such as the Gulf of Mexico. Capital and exploratory expenditures totaled $2.7 billion in 2016, down 38% from the same period last year.

Among its major accomplishments during the second half of 2016, BHP saw mechanical completion at its Escondida Copper Mine water supply project in Chile, with first water expected by the end of first-quarter 2017. Industrial Info is tracking the $2.1 billion construction of Escondida's seawater desalination plant, which is expected to supply the copper mine; the $600 million seawater pipeline, which will connect the desalination plant with the mine; and the mine's $180 million Los Colorados Concentrator Plant restart, which also will involve upgrades at the 100,000-ton-per-day facility. For more information, see Industrial Info's project reports on the desalination plant, the pipeline, and the concentrator restart.

BHP also made significant progress on the $2.6 billion construction of its potash mine and mill in Jansen, Saskatchewan, where the 1,030-meter-deep service and production shafts have been safely excavated. The company expects the current phase to produce 1.4 million tons per year of compacted granulated potash, and hopes two other proposed phases, which are under prefeasibility study, will bring it up to 8 million tons per year. BHP currently estimates the full, three-phase project could cost up to $16 billion. For more information, see Industrial Info's project report.

In the Gulf of Mexico, BHP's $350 million Shenzi Field offshore drilling program is expected to be completed toward the middle of this year. BHP is drilling four infill wells to increase production 15% and extend the life of its investment in the field. Transocean Offshore Incorporated (Houston, Texas) is serving as a contractor. For more information, see Industrial Info's project report.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.