BHP cuts exploration spending by 70% to $900 million in 2017

Because of forecasts that Australia’s mining industry would suffer from a 10-year commodity glut, BHP Billiton (ASX: BHP) reduced by 70 percent its allocation for exploration in the coming financial year. With the cut, the mining giant plans to spend $900 million (US$1.2 billion) on exploration.

The amount is 18 percent of BHP’s overall capital budget. The miner would focus in the next 12 months on exploring for oil and copper, says Laura Tyler, BHP geosciences leader, reports The Australian.

She shares that BHP, which had developed over the last four years a new and more focused approach to petroleum exploitation, had started drilling in Trinidad and Tobago and got additional rig to begin drilling in a prospective block north of its Shenzi operations in the Gulf of Mexico.

For copper, BHP is searching for the metal in South American, North America and Australia and seeking new partners for its ventures, including with junior miners. The increase in copper exploration activity aims to take advantage of falling costs while other miners are retreating.

Since 2013, BHP has cut its exploration costs by 70 percent, while hiking targets tested by 44 percent, adds Tyler.

Prior to the Thursday Brexit vote, Zacks Investment Research upgraded BHP to “Buy” or a Zacks Rank#2 from “Hold” or Zacks Rank#3, reports Yahoo Finance. The upgrade was due to the giant miner having “established a new operating model to make its business more secure in the disturbed mining market.” The new model focuses on safety, cost and volume.

However, Motley Fool reported on Friday that BHP was one of the hardest hit among Australian stocks by the Brexit "Leave" vote with shares down 7.9 percent, while the S&P/ASX 200 Index shed 3.5 percent. Other Australian miners also suffered losses, Rio Tinto (ASX: RIO) by 7.8 percent, Fortescue Metals Group Limited (ASX: FMG) 8.8 percent, Woodside Petroleum Limited (ASX: WPL) 3.5 percent and Santos Limited (ASX: STO) 8.3 percent.

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