BHP Billiton Ltd. Chief Executive Officer Marius Kloppers said the world’s largest mining company doesn’t have plans to return any surplus cash to shareholders. “At this point in time we have no plans to return any surplus cash,” Kloppers said in a Bloomberg Television interview in London yesterday.

“We believe we have good plans to put that money to work in our business.”

The Melbourne-based company plans $10.7 billion of capital expenditure
this year and will spend $5.8 billion to create an iron ore venture
with Rio Tinto Group, Kloppers said. It’s also studying potential
acquisitions, including some in oil and gas, and will spend “billions
of dollars” in coming years to develop the Jansen potash project in
Canada, he said.

The company yesterday posted second-half net income of $3.26 billion, a
drop of 65 percent from a year earlier, beating the $3.1 billion median
estimate of six analysts surveyed by Bloomberg. Net operating cash flow
was a record $18.9 billion.

Declines in metal prices also cut profit at Brazilian rival Vale SA by
84 percent in the second quarter and at Switzerland’s Xstrata Plc by 77
percent in the first six months of the year. Xstrata’s operating cash
flow slid to $819 million in the second half from $3.1 billion.

‘Financial Clout’

“The scale and financial clout which BHP enjoys over its peer group is
clearly evident when you compare its result to that of its smaller
rival Xstrata,” said Cameron Peacock, a Melbourne-based analyst at IG
Markets. “To produce a record net operating cash flow of $18.9 billion
against the backdrop of the global financial crisis is certainly
impressive.”

BHP, which increased its full-year dividend 17 percent, gained 0.7
percent to A$38.26 at the 4:10 p.m. Sydney time close on the Australian
stock exchange. The stock has gained 26 percent this year compared with
the 19 percent gain in the benchmark S&P/ASX 200 Index.

Kloppers, 46, cut output of some metals and eliminated jobs after commodity prices slumped in the second half of 2008.

BHP, which suspended a share buyback in December 2007, scrapped a
hostile bid for London-based Rio last November. The transaction would
have been the first major acquisition since BHP bought WMC Resources
Ltd. for $7.6 billion in 2005.

In addition to the acquisition opportunities it’s studying, BHP plans
to become one of the world’s biggest potash producers by developing
Canadian assets, Kloppers said. It spent $95 million developing Jansen,
which will have an annual capacity of 8 million metric tons of potash,
he added.

Portfolio Diversification

“We think that it would round out the diversification of our portfolio
nicely,” he said referring to the fertilizer. “It has a different set
of drivers and hence would fit well.”

The company’s iron ore unit, the biggest earner in the year ended June
30, accounted for about 20 percent of sales. BHP’s base metals unit,
which includes copper, silver, lead and uranium, suffered a 52 percent
drop in sales, making it the fourth-biggest earner, down from the
biggest previously.

Iron ore producers agreed this year with some steelmakers to cut annual
contract prices for the first time in seven years. Talks with Chinese
mills, the biggest buyers, are continuing.

BHP said yesterday it had $6 billion of exceptional items in the fiscal
year ended June 30, including $3.6 billion for the suspension of the
Ravensthorpe mine, $510 million for the sale of the Yabulu refinery and
$450 million for the lapsed offer for Rio.

Commodity prices have rallied 15 percent this year as the global
recession abates. The rebound may be extended into next year, Nouriel
Roubini, the New York University economist who predicted the financial
crisis, said on Aug. 3.

China bought record volumes of oil and iron ore in July as automakers,
steel producers and builders expanded output to meet rising demand. Oil
imports jumped 18 percent and iron ore purchases rose 5 percent, the
country’s customs office said on Aug. 11.

Source: Bloomberg

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