BHP not immune to global economic crisis
Mining giant BHP Billiton said Thursday it would not be immune to the effects of a slowdown in demand for commodities but was in a better position to cope than its rivals.
"We believe that our financial strength and low position on the cost curve mean that we are better placed than our competitors to respond to fluctuating demand for our products," said chief executive Marius Kloppers.
He told shareholders at the Anglo-Australian company's annual general meeting in Melbourne that the world's biggest miner had so far been able to maintain its sales volumes through a mix of contract and spot sales.
But Chinese steel production, a key driver of demand for BHP's iron ore and coking coal, is expected to be down about 17 percent year on year in 2008 and "this will eventually flow through to all of us in the industry," Kloppers said.
"There is no doubt that these are very challenging times, uncertainty in the shorter-term outlook remains and we do not expect to be immune from the changes in the world economy."
Kloppers said BHP would "respond accordingly" if falling prices made any of its operations cash negative, and would advise the market if it planned any production cuts.
"Appropriate action is that if you don't have the prospect of making a profit from a business, (you) shut it down until conditions change," he told reporters.
BHP chairman Don Argus told the meeting that a 70 billion US dollar bid for rival Rio Tinto had been dropped because it would not have been in shareholders' best interests.
Argus said that while BHP still believed in the industrial logic of the bid Rio Tinto's debt position was a concern, especially given that it hadn't managed to make divestments to pay down debt.
A merged company would have had a net debt of nearly 120 billion dollars during a global credit crisis and a slump in commodity prices, he said.
"Your board considers that the large debt position that would have resulted from the acquisition of Rio Tinto would have created an unacceptable risk for our shareholders in this environment.”