BHP's new chief to hold course, jettison loss-making assets

MELBOURNE Thu Feb 21, 2013 8:05am GMT

BHP Billiton's newly appointed chief executive officer Andrew Mackenzie talks during a media conference in Sydney February 20, 2013. REUTERS/Daniel Munoz

BHP Billiton's newly appointed chief executive officer Andrew Mackenzie talks during a media conference in Sydney February 20, 2013.

Credit: Reuters/Daniel Munoz

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MELBOURNE (Reuters) - Andrew Mackenzie, a low-key operations man, beat higher profile rivals to the top spot at BHP Billiton, but his record shows he won't shy away from the tough calls needed to exit the top global miner's loss-making businesses.

BHP is the last of the big miners to replace its chief executive, at a time when empire builders are being ousted in favour of more conservative appointments, picking a man recognised for his political nous and a more common touch than his predecessor.

Mackenzie, who ran some of BHP's toughest assets, is also an executive virtually handpicked by the miner's previous boss, Marius Kloppers, and closely linked to the company's mega projects and deals including an ill-fated tilt for Potash Corp (POT.TO).

Where an external appointment would have signalled a shift, Mackenzie has been read as a steady hand at the tiller.

"I wouldn't say he was an empire builder, I wouldn't say he was conservative. I'd just say he's a very intelligent chap who knows how to do business," said a former colleague at oil major BP (BP.L), who asked not to be named.

The Glasgow-raised geologist and academic, spent 22 years at BP and more than three years at BHP rival Rio Tinto (RIO.AX)(RIO.L), before jumping ship to head up BHP's base metals, uranium and potash units, managing 50,000 people across four continents.

"There are many things that will not change, most notably the strategy which has served us well," Mackenzie told reporters. "My job is to sharpen the focus."

BHP Chairman Jac Nasser was also at pains to stress there would be more of the same from the miner's new boss, sweating its best assets as hard as possible and slashing costs, including capital spending, exploration and operational costs.

TOUGH CHOICES

It will be third-time lucky in a tilt for the top for Mackenzie, a former chairman of influential left-leaning British think tank Demos who left BP after losing out in the race for the top echelons. He later lost out at Rio too, where he was overlooked for the chief executive role that went to Tom Albanese in 2006.

"I think he's not as brash and outspoken as some, that's one reason he left BP," said one British oil industry executive who has worked with Mackenzie.

"Some of those who stayed were more brash and outspoken but without the wisdom of someone like Andrew."

Mackenzie is not afraid of ditching major projects, selling or shutting down assets, based on tough decisions he has had to make in the non-ferrous division.

Under him, BHP has shrunk its uranium aspirations in the wake of Japan's Fukushima disaster.

His division pulled the plug on a long-delayed $20 billion (13 billion pounds) expansion plan for BHP's Olympic Dam copper and uranium mine last August, earning the ire of the South Australian state government and resulting in more than 250 jobs being cut.

BHP also agreed to sell its undeveloped Yeelirie uranium deposit to Canada's Cameco Corp (CCO.TO) last year for $430 million.

Those moves suggest he would not hesitate to sell BHP's aluminium and nickel businesses, which together reported a $285 million loss in the December half and have already been set aside as "non-core", but only for the right price.

"There are non-core assets, but we won't hoof them out for nothing," Mackenzie told reporters in London.

Investors are looking for the new chief to cast a fresh eye over the company's assets to ensure they all meet its long-held mantra of being large, long-life, low cost and expandable, and help position the company to return more cash to shareholders.

"I think some decisive action on underperforming assets would be welcome," said Ben Lyons, who helps manage A$400 million at ATI Asset Management, which owns shares in BHP.

OIL, POTASH FUTURE?

In oil and gas, Mackenzie worked in a range of jobs at BP from running its oil and gas reservoirs to making plastics, and said he sees huge opportunities for extracting savings by marrying the petroleum business more closely with mining at BHP.

But in the wake of BHP's $17 billion foray into shale gas in the United States just before gas prices slumped, leading to nearly $3 billion in writedowns, he is unlikely to splash out on any more energy acquisitions in the sector in the near term.

In general, he said M&A was largely off the agenda.

"You would be wrong to say that M&A is completely excluded, but it is not central to the strategy that I am shaping up," he told reporters. "It is about running what we have extremely well."

Mackenzie may have been picked not just for his oil and gas expertise but also for his background in chasing potential growth in potash, a commodity he has been involved in ever since entering the mining industry.

So far his efforts have been thwarted. His non-ferrous arm put on hold the $8 billion Jansen potash project in Canada last year, holding off BHP's expansion into a commodity that he has been involved in ever since entering the mining industry.

At Rio Tinto (RIO.L) he worked on a potash project in Argentina that was eventually sold to Brazil's Vale (VALE5.SA).

And in what may have been his biggest disappointment, he was the point man in Canada, along with BHP's now chief financial officer, Graham Kerr, on BHP's failed $39 billion bid for Potash Corp (POT.TO).

A former co-worker in Australia said while some more charismatic executives may have missed out on the top job at BHP, Mackenzie was probably the right man for now.

"Maybe for the times he's the right guy. He'll be pretty good, very diligent and calm and probably not rock the boat."

(Additional reporting by Clara Ferreira-Marques, Andrew Callus and Tom Bergin in LONDON; Editing by Richard Pullin)

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