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BHP confident on global outlook

Whilst it recognised that the 2012-13 period was challenging, global resources giant BHP Billiton (ASX: BHP) has reaffirmed its confidence in the recovery of the global economy – particularly in the United States and Asia – with CEO Andrew Mackenzie expecting to deliver “superior results”.

Jac Nasser, the miner’s chairman, said “We are confident of the continued recovery in the US, despite some risk from the unwinding of monetary stimulus”. Meanwhile, the company also expects strong growth to continue in Asia, as well as 7% growth in the Chinese economy – which accounts for around 30% of BHP’s revenue.

Despite recent weakness from China – which has been reflected in the company’s declining financial results – Nasser believes that “China, and other emerging economies, will be the major drivers of economic growth in the long term”. He added that this could result in a 75% increase in demand for certain commodities over the next 15 years, highlighting the importance of BHP’s ramped up levels of production.

Currently, the miner maintains a ‘four pillar’ strategy, consisting of copper, iron ore, petroleum and coal, however, it is very possible that potash could be added as a fifth pillar in which it would be recognised as a core operation. BHP has committed to investing a further US$2.6 billion in its Jansen project over the coming years, as it aims to take advantage of the future need for quality fertilizer ingredients. Following this strategy, the company is in a very good position to meet every phase of the development cycle.

Foolish Takeaway

Just as with other miners such as Rio Tinto (ASX: RIO) or Fortescue Metals Group (ASX: FMG), BHP’s shares have plunged over the last couple of years based on volatility in commodity prices and signs of slowing Asian growth. Whilst BHP’s confidence may be refreshing, investors must still ask the question as to whether the potential benefits are worth the risks still facing the sector.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

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