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Back to the Future feature. BHP Billiton: Hanré Rossouw – portfolio manager, Investec Asset Management

BHP Billiton’s origins trace back more than 130 years to Indonesia.

 

HANNA BARRY: The SAfm Market Update with Moneyweb and Investec will, starting today, be bringing you a weekly business and investment series in which we highlight a prominent company in the series entitled “Back to the Future”. We focus on the history, business development and investment potential of a particular company.
    Today the focus is on the Anglo-Australian resources company BHP Billiton. On the line is Hanré Roussouw, portfolio manager at Investec Asset Management. Hanré, it’s good to have you with us and welcome.

HANRÉ ROSSOUW: Good day and thank you very much.

HANNA BARRY: BHP Billiton has a market capitalisation of some R484bn. It’s one of the largest stocks on the JSE today. But its origins trace back, as far as I understand, more than 130 years to Indonesia. Tell us a bit about that.

HANRÉ ROSSOUW: That’s right. The BHP Billiton we know today really came from the merger in 2001 between the South African group Billiton and the Australian group BHP – hence the name BHP Billiton of course. But the Billiton company itself – you are right – the name is traced back to the Billiton Island in Dutch Indonesia where they started mining tin in 1851.
    The Gencor company, which is really the origin of Billiton, came to force in the 1800s. It was actually developed into consolidation of South African assets. And, interestingly enough, actually Harry Oppenheimer was quite involved in creating and empowering of the Afrikaans business interest into this Gencor Group to consolidate a lot of the smaller mining assets in South Africa in effectively Afrikaans empowerment at the time.
    It’s quite interesting that Derek Keyes later as the finance minister was instrumental in consolidating these assets. And then a gentleman called Brian Gilbertson bought the Billiton assets from Royal Dutch Shell at the time and consolidated the Gencor Group into a renamed Billiton, listed it in London in 1997 and then merged with BHP in 2001.
    So quite a strong South African heritage in this group. And of course Marius Kloppers, a South African, also ran the company from 2007 to 2013, and he was quite instrumental in focusing that group and improving the quality of the assets. So we can be quite proud of the South African influence we’ve had on what is today the world’s biggest mining group.

HANNA BARRY: Absolutely amazing when you take a look at history, take a look back. You mentioned that it’s the world’s biggest mining group today. It of course stated mining tin in 1851. Today it mines all kinds of things. But it is under pressure, like all resource stocks, all resource companies. Yet investors still do like the share, they like the company, they like the management. What is your reading of where BHP Billiton is today?

HANRÉ ROSSOUW: I think critically for me the success of BHP is from a very diversified asset base. I think one has to recognise that in the commodities industry you are looking at something that’s quite cyclical in nature and I think that’s where BHP Billiton really stands out. Diversified assets – it has got four core pillars, as they call it. Iron ore, oil and gas, copper and coal. And also a fifth pillar in potash – that’s more in a slumber mode, it’s something they can deploy at a later stage, it’s more of a development asset.
    But the key is that these different commodities have different peaks and troughs and different cycles, and they are able to invest at different time in the cycle, and they do this also off a very conservatively managed balance sheet. I think that’s the strength in Billiton – that you’ve got a company that’s able to deploy capital at the right stage of the cycle. But they also have assets that are certainly superior to most other mining groups, so certainly will give you good returns throughout the cycle.

HANNA BARRY: Hanré Rossouw is a portfolio manager at Investec Asset Management.

The full interview – including Hanré’s thoughts on the spin­off of South32 and whether he thinks Billiton is a buy, sell or hold – can be accessed here.

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