BHP Billiton has increased its annual exploration spending by 29%, allocating almost all of a US$900 million budget to finding new copper and oil deposits. The company has singled out these resources as being the key to support its future growth.
The budget increase comes despite a decision to cut overall capital expenditure to $5 billion in the 2016-17 financial year, compared to a peak of $25 billion in fiscal 2013.
BHP is the world’s second-biggest listed copper miner and will be seeking more of the metal in Chile, Peru, the US, Canada and South Australia, as well as examining new partnerships.
The copper exploration program is targeting tier 1 greenfield assets, with a focus on copper porphyry and skarn deposits in Chile, Peru and the southwest of the US; sedimentary hosted deposits in the north of Canada; and iron ore copper gold deposits in South Australia’s Stuart Shelf, adjacent to Olympic Dam, which is undergoing a rapid development to access its enormous – and relatively untouched – Southern Mine Area.
“We are investing at a time when most in our sector continue to reduce discretionary spend,” BHP’s head of geoscience Laura Tyler said in a statement issued in June.
“We execute our copper exploration both directly and through investment in joint venture opportunities and we continue to seek partnerships with junior explorers.
“Next financial year, we intend to invest approximately US$900 million in exploration, which represents 18% of our overall capital budget. We have reduced exploration operating costs by 70% since 2013, and this year we have increased the targets tests by 44%.”
Laura Tyler said the company was challenging existing paradigms with a scientific based and disciplined approach.
In regards to oil, BHP has started drilling sites off the coast of Trinidad and Tobago with another rig set to begin work in the Gulf of Mexico.
The company believes its substantial oil business, which includes shale deposits in the US, can continue to deliver returns at a crude price of $60 a barrel. Oil is currently trading at around $50, having rallied from 12-year lows at the start of 2016.
In May the company’s CEO Andrew Mackenzie outlined BHP’s focus on strengthening its assets and taking proactive action to build now for future commodity strength. “We are increasing our exploration activity to take advantage of falling costs as others pull back.”
“We have embarked upon one of our most significant oil exploration programs, accelerating activity in our three priority basins,” he said, which comprise the Gulf of Mexico, the Caribbean and the Northern Beagle sub-basin off the coast of Western Australia.
“We have established a new global technology function to implement integrated programs to unlock resources and lower costs. We have opportunities identified at a number of our major assets that we expect to create significant value over time.”
BHP also plans to establish a Geoscience Centre of Excellence to aid its exploration efforts, with Laura Tyler stating that exploration teams would be supported by a globally integrated geoscience team “to facilitate a faster adoption of best practice and new technology”.