24/10/2008 - 06:50

BHP ready to seize the day

24/10/2008 - 06:50


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BHP Billiton Plc, the world's biggest miner, is poised to snap up smaller players struggling amid the gloom affecting the global economy.

BHP ready to seize the day

BHP Billiton Plc, the world's biggest miner, is poised to snap up smaller players struggling amid the gloom affecting the global economy.

Speaking at the company's annual general meeting in London yesterday, chairman Don Argus said BHP's diverse portfolio of assets and strong balance sheet put it in a competitive position amid the turmoil on world markets.

"We believe our balance sheet places us in a unique position in the resources sector to take full advantage of not only the recovery when it occurs, but also in capitalising on opportunities that will no doubt arise in this cash-strapped external environment," he told shareholders.

The comments came as South African competition authorities recommended approval of BHP's hostile takeover of rival Rio Tinto, with conditions attached.

The $US120 billion ($A178.1 billion) bid for Rio has created concerns around the globe that the mega-miner would have too much control over prices and supply.

South Africa's Competition Commission said in a statement that BHP's takeover would not weaken competition in most markets, except for aluminium mining and processing.

Resource stocks have plunged on the Australian share market this year amid expectations the financial market turmoil will spark a global recession and reduce demand for commodities.

Mr Argus reiterated BHP's belief that China's industrialisation would continue to drive demand for its products, despite the fact growth had "softened recently" in the Asian country.

"We remain convinced that the ongoing industrialisation and urbanisation of China and other developing economies is still at a relatively early stage and will continue to drive strong long-term demand for our products," he said.

BHP chief executive Marius Kloppers said even in currently turbulent economic conditions, the future of the business remained positive.

"While we fully expect some reverberations from global economic shocks in the short and medium term, we remain focused on meeting growing customer demand in the long term," Mr Kloppers said.

He said BHP was ready to pounce on opportunities when they arise.

"Projects cannot really be financed at the moment by small companies, and you see their share prices reflect that," he said.

"As that cash tightness progresses - we're already seeing these junior companies have share prices that are now back to where they were perhaps five years ago - certainly in theory there should be some opportunities to take advantage of and since we have the money that's obviously the case."

BHP's willingness to consider smaller ventures comes despite its bid for Rio Tinto, which would create a global mining giant.

"One would obviously want to maintain the balance sheet in strong condition, but I certainly wouldn't rule out that you can do smaller things, as we've done indeed over the last year," he said.

Mr Argus warned market turmoil that had hit BHP's share price would continue.

"We must assume this volatility and uncertainty will continue for some time," Mr Argus said.

Shares in BHP and Rio fell sharply in London yesterday, following falls seen in Australia yesterday amid reports European Union (EU) regulators had told BHP its $US69 billion ($A102.5 billion) proposed takeover of Rio may breach competition law.

Mr Kloppers said BHP was awaiting a ruling from the EU's competition watchdog, expected by early next year.

"We unfortunately just have to wait now," he said.

Rio has rejected BHP's offer, saying it under-values the firm and its growth prospects.

Australian competition authorities said on October 1 that the proposed acquisition would not substantially lessen competition.


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