PERTH (miningweekly.com) – Mining major BHP has made a case for its current project portfolio amidst renewed pressure from activist shareholder Elliott Management to abandon the US petroleum assets.

BHP CEO Andrew Mackenzie told delegates at the Bank of America Merrill Lynch Global Metals, Mining & Steel Conference, in Barcelona, that for a total investment of $5-billion ocross the company’s project portfolio, BHP could add over 20% to its current production, at an average return of 75%.

Referring to the company’s petroleum assets, Mackenzie said that substantial advances in the operating capability and capital productivity of BHP’s shale assets continued to lower drilling and completion costs, supporting returns on invested capital of more than 30% on incremental investments.

“All options to fully realise value for our shale acreage will be pursued, including further appraisal, new technology and additional asset sales and swaps. We will be flexible with our plans and commercial in our approach,” Mackenzie said.

He also pointed out that the company’s focused petroleum exploration programme had an unrisked value of over $20-billion, close to a quarter of which was in low- to medium-risk prospects that would be tested in the next two years.

“Recent success in the Gulf of Mexico and Trinidad and Tobago, along with the successful Trion bid, give us the confidence to accelerate our counter-cyclical investment,” Mackenzie added.

Furthermore, major growth projects, valued at up to $25-billion, also offered BHP potential average returns of over 16% at consensus prices, with Mackenzie noting that the $2.2-billion expansion of its Spence copper project, in Chile, will be examined by the board in August this year.

If approved, the expansion project could add around 200 000 t/y in the first ten years of production.

In addition, Mackenzie noted that studies on the expansion of the Olympic Dam operation, in South Australia, were also progressing well, with a phased expansion of the Jansen potash project, in Canada, expected to generate competitive returns in Stage 1, with significant potential upside in subsequent stages.

Meanwhile, Mackenzie told delegates that technology programmes to improve safety, lower costs and unlock resources, with an unrisked value of up to $12-billion, were also among the most capital efficient options in the portfolio, while further cost reductions will support a 10% value uplift as BHP continues to leverage its portfolio, standardised systems and greater connectivity across the company to further improve safety and productivity.

“We have achieved a great deal over the past year, but we are not standing still. Our roadmap today contains an enhanced set of opportunities that will see us prosper and grow value per share throughout the cycle, and in multiple scenarios,” Mackenzie said.

“Above all, we will remain disciplined, and drive consistent and transparent application of our capital allocation framework, which includes cash returns to shareholders.

“Our path is deliberate, with value and returns at the centre of everything we do.”