BHP in good shape to act if coronavirus disruption brings M&A openings

March 11, 2020

The coronavirus has spread to at least 105 countries and territories around the globe and has impacted travel, gatherings and supply chains in every sector. BHP Group, the world’s largest mining company is not immune to the spread of the virus, but has also seen some potential opportunity.

Speaking at the Australian Financial Review summit in Sydney, Australia, BHP chairman Ken MacKenzie said BHP is in good shape to take action should supply chain disruption caused by the global coronavirus epidemic trigger acquisition opportunities.

“On balance, the business is in very good shape,” MacKenzie said. “I’m not sure if there will be any opportunities that will come from this but if there are, we are actually in a position to act.”

BHP previously said this year’s demand could take a hit if fallout from the coronavirus outbreak extends beyond March.

Even as China’s businesses and economy show signs of recovery after a stringent campaign to contain the virus, production and transport disruption within the country have boosted import demand for BHP’s products such as iron ore and metallurgical coal, MacKenzie said.

Reuters reported that global miners have been paying down debt and returning cash to shareholders since commodity prices revived following a crash in 2015, but investors remain cautious about large buys following disastrous top-of-the cycle acquisitions at the turn of the last decade.

BHP has returned $33 billion to shareholders since the cycle troughed and has paid down net debt to $12.8 billion, around half of $25.9 billion this time four years ago. “We have engineered the business so that (at) the bottom of the cycle, the business is not only capable of surviving but of thriving,” MacKenzie said.

BHP has been focused on scenario analysis around the potential impact of the virus on global supply chains, he said. Since more value is created from moves at the bottom of the economic cycle, or when assets are cheap, the miner is also looking at any opportunities that might arise from other disruptions, like climate change.

“We need to have a business that is ready for the bottom of the cycle at all times,” he said.

Photo: BHP’s Olympic Dam uranium, copper, silver mine in Australia. Credit: BHP.
 

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