* BHP says 2014 capex to drop to $18 billion
* BHP promises internal competition for capital
* Rio sticks to $2 billion cost cut target in 2013
* Rio promises "significant cash proceeds" from sales
By Clara Ferreira-Marques
LONDON , May 14 New bosses at two of the world's
largest mining companies, BHP Billiton and Rio Tinto
, wooed investors on Tuesday with promises to slash
billions of dollars of spending and press ahead with asset
sales, boosting returns.
Mining companies have come under pressure from investors for
splashing out on pricey projects during the industry's boom
years - at the expense of shareholder returns - while costs
spiralled out of control.
At an industry conference that marks one of his first public
appearances, new BHP boss Andrew Mackenzie promised a
"relentless" focus on productivity to boost margins, and said
capital and exploration expenditure next year would drop to
around $18 billion, including investment in the miner's onshore
oil and gas business.
That is down almost a fifth from BHP's 2013 financial year -
as spending associated with its major projects drops - and is
expected to fall further to some $15 billion, "or less" as the
company reduces the number of major projects that are approved,
hoping to keep a lid on debt levels.
Analysts welcomed the drop, though some had expected more.
"I stress, if our investment criteria cannot be met in any
one project, product or geography, we will redirect our capital
elsewhere or we will not invest," Mackenzie said, adding lower
spending would mean "even more capital returned to
Mackenzie, who took up his role at the world's largest
mining company earlier this month, said the group was also
pressing ahead with its plan to focus on big projects in more
developed countries. He did not exclude an approval for its
Jansen potash project in Canada, on which no decision has been
made - but promised sales.
"It will come as no surprise that I will continue to
simplify the portfolio. However, as I have said in the past,
value will remain a primary consideration," he said.
BHP has sold off $5 billion of assets this financial year,
including the Yeelirrie uranium deposit, a stake in Richards Bay
Minerals, its diamond business, and is in the process of selling
the Pinto Valley copper mine in Arizona.
Speaking at the same conference, Rio's own new chief
executive, Sam Walsh, echoed comments on lower spending,
confirming $2 billion of cost cuts in 2013. Like BHP, Rio will
seek to reduce its capital expenditure - from $17 billion last
year to around $13 billion.
Walsh also promised "significant cash proceeds" from asset
sales this year, as Rio, like its peers, focuses on core assets.
Rio, battling its debt burden, has a long list of assets on the
block, from its diamond arm to aluminium.
"We are looking at further disposals of potential non-core
assets, in addition to those already announced," Walsh said.
Shareholders have welcomed the cost cuts, miners' new-found
focus on returns and the gospel of "acting like owners", but at
least one investor questioned BHP's Mackenzie on the risk of
"shareholder-forced group-think" and the need to invest even
when prices are lower.
"I will invest less to grow the company more," Mackenzie
said, promising to invest "through the cycle rather than in a
counter cyclical way".
The first major test is likely to be the $8 billion Jansen
project - one of few major greenfield projects still in the BHP
pipeline, though it will not be approved before next year.
"(Jansen) has to perform," Mackenzie told the conference.
"It has to compete for a smaller amount of capital."