BHP eyes $10 billion value unlock

BHP has flagged plans for up to $US10 billion in additional value as it doubles down on disciplined capital allocation and long-term growth.

Addressing the recent BMO Global Metals, Mining & Critical Minerals Conference, BHP chief executive officer Mike Henry said the miner’s latest half-year result reinforced confidence in the shape and direction of the business.

“We have had another excellent six months both operationally and financially,” he said, pointing to strong production delivery, cost control and operational records in copper and iron ore.

“We’ve performed well on production delivery and cost control, with operational records in copper and iron ore.

“We’ve also further strengthened our approach to capital allocation; we have looked for opportunities to unlock
additional value from certain assets that are valued even more highly by others.”

BHP’s recently announced $US4 billion silver streaming agreement which, together with a Western Australia power infrastructure deal, represents more than $US6 billion in cash unlocked, subject to completion.

“Across the business, we see potential to unlock up to a total of $US10 billion,” Henry said. “As always, this will go through our capital allocation framework to be applied to higher returning and more value accretive uses, including both reinvesting in growth and shareholder returns.”

The company reiterated its commitment to a minimum 50 per cent payout ratio and highlighted more than $US110 billion returned to shareholders over the past decade.

“At spot prices we expect to generate around $US60 billion in attributable free cash flow over the next five years,” Henry said.

“Even if we imagine an extreme, prolonged low-price environment – the lowest prices across our commodities in the last three years extrapolated over the next five years – we would generate around $US10 billion extra [free cash flow] over that period.”