BHP Billiton Limited (ASX: BHP) held its annual general meeting (AGM) in Adelaide on Thursday with the miner reiterating to investors that increasing capital returns were still a major focus.
At a time when iron ore and coal prices are rapidly diminishing, investors have become increasingly cautious that the miner may not be able to increase capital returns. An item that has been on the agenda for a number of years as BHP's shares have heavily underperformed the broader market.
Indeed, BHP Billiton's shares fell considerably following its full-year results update in August, after the miner failed to announce a highly anticipated share buyback program, which would have acted to reward shareholders in the long run.
NewCo
One way the miner hopes to improve returns is by spinning off its non-core assets into a separate entity, currently dubbed "NewCo". Worth an estimated US$15 billion, the aim of the spin-off would be to enable both entities to focus on maximising the value of each of their divisions, thus allowing BHP Billiton to greatly improve the operating efficiency of its core assets.
BHP provided an update regarding the spin-off, stating that shareholders will be able to vote in May 2015, which should allow the demerger to occur in June. BHP's CEO Andrew Mackenzie said: "Everything we are doing, including productivity accelerated by the demerger, is aimed at increasing cash returns to you, our shareholders."
It is currently believed that a buy-back may not be announced until at least next year as a result of the plummeting commodity prices. As BHP Billiton has said in the past, it will not consider a capital management program until its net debt is under US$25 billion.
Olympic Dam
BHP also outlined its plan to expand the Olympic Dam by using a heap-leach process. The miner originally shelved plans of a $30 billion expansion at the mine two years ago, but should the heap-leaching trials prove successful, it could opt to expand the mine's output at some point this decade.
Climate Change
As had been expected, climate change was also a key topic at the AGM. Climate change has been a particularly hot topic recently and was also a focus of U.S. President Barack Obama at the recent G20 meeting. BHP Billiton's chairman Jac Nasser said climate change was of great importance to the miner, stating that the company's long-term business strategy was clearly dependent on sustainable global growth.
Should you buy?
BHP Billiton's shares have dropped 1.7% today to be trading at $32.11 – just 0.7% above their 52-week low. At that price, the shares are looking reasonable for long-term investors. Given the miner's high level of diversification and low operational costs, BHP is certainly one of the more attractive miners you could buy.
However, the shares will also be susceptible to further falls in the iron ore price – a scenario which is considered very likely. Iron ore fell to just US$70.20 a tonne on Wednesday night and analysts are suggesting it could fall into the US$50s at some point next year. With that in mind, investors may be better off waiting for conditions in the mining sector to settle before buying shares.
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