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1 Year : From Oct 2018 to Oct 2019
By Rhiannon Hoyle
SYDNEY--BHP Group Ltd.'s (BHP.AU) chief financial officer labelled the miner a value investor, although cautioned the minerals industry risks investing too little in future projects amid a sharp focus on shareholder returns.
Companies including BHP, the world's largest miner by market value, and Anglo-Australian rival Rio Tinto PLC are throwing off billions of dollars to shareholders via dividends and share buybacks, making good on a pledge to increase payouts after digging their way out of a steep market slump.
Value over volume emerged as the mantra of the mining industry during the downturn, which was characterized by an oversupply of commodities such as iron ore as miners completed new projects just as demand began to cool.
"This organization was a growth investor, it made decisions with a growth mentality," Peter Beaven told an investor briefing in Australia on Wednesday.
"Today--geez, I'm going to live to regret this--we are a value investor; we are a deep value investor," he said, referring to a style of investing focused on undervalued assets that has been championed by the likes of Benjamin Graham and Warren Buffett.
Still, worries are emerging that miners are sacrificing opportunities for growth such as building mines or doing deals.
Mr. Beaven said past mistakes continue to haunt the industry. Miners in recent times wrote down many billions of dollars' worth of investments bought at near the peak of the last boom. "The result is that trust has been dented and the industry's license to invest curtailed," he said.
In 2017, BHP, Rio Tinto, Glencore, Vale and Anglo American PLC showered investors with dividends worth more than 50% more than the prior year, according to S&P Global Ratings, which has forecast even fatter returns in the years ahead.
While payouts have risen, capital spending dropped to US$48.3 billion in 2017 from a peak of US$150.1 billion in 2012, according to commodities consultancy Wood Mackenzie. That could fall further over the next few years if more projects aren't approved.
Mr. Beaven cautioned a narrow focus on cash returns might come at the expense of investment needed for the long run.
"The risk is we confuse no investing with good investing," he said. "We need to find a balance."
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(END) Dow Jones Newswires
November 20, 2018 21:00 ET (02:00 GMT)
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