BHP to look for more joint ventures as recovery is expected to be slow

The group is looking to increase production while keeping costs low

LONDON (Reuters) - 

Miner BHP Billiton Plc/Ltd (BLT.L: Quote) (BHP.AX: Quote) is considering more joint ventures like its 50-50 iron ore deal with Rio Tinto Plc/Ltd (RIO.L: Quote)(RIO.AX: Quote) as it seeks to increase production while keeping costs under control.

BHP's stance as the world's biggest mining company means takeovers would be rare since it is only seeking huge assets, Chief Executive Marius Kloppers told the group's annual meeting of shareholders in London.

The group, which said it expects a sluggish recovery from the global downturn, was always looking for opportunities and these are likely to include more joint ventures, Kloppers said in reply to a question about M&A potential following the collapse last year of a takeover offer for Rio Tinto.

"Our strategy basically constrains us to large, low-cost long-life, expandable assets that are export oriented, and these assets only come to market very, very seldom," Kloppers said.

"You shouldn't expect that we do transactions of smaller companies with smaller assets, but from time to time we're going to do things like the Rio Tinto JV."

Earlier this year, the world's second- and third-biggest iron ore miners agreed to combine their iron ore assets in Western Australia.

On Sept. 7 the Australian newspaper said BHP and Rio were also looking at a possible $1 billion merger of their Canadian diamond operations, citing no sources.

BHP said on Oct. 15 the two miners had scrapped a plan to co-market some iron ore from their proposed joint venture, which has drawn criticism as being anti-competitive.

Earlier on Thursday Kloppers said that due to the group's strong balance sheet, it was well positioned to take advantage of any opportunities the current market delivers.

BHP previously said it was interested in expanding in potash, a key raw material for fertiliser, and speculation has swirled about possible acquisitions in that sector.

WEAK RECOVERY

Kloppers also warned that a recovery from the global downturn was expected to be weaker than in previous recessions.

"It is our view that we will come out of this recession less strongly than in previous cycles. We therefore believe it won't be until mid 2010 before we see clean underlying demand that is not masked by inventory effects."

Restocking is underway in major economies, but commodity demand will depend on the strength of rebuilding inventories in industrialised countries, he added.

Asia would remain a bedrock of commodity demand, added Chairman Don Argus.

"While we believe the global economic recovery will be sluggish, we also continue to believe there will be strong long-term demand for our products from the Asian region."

Argus is due to retire in early 2010 after more than 10 years as chairman, presiding over the group's transformation into the world's biggest miner. He will be replaced by former Ford Motor Co (F.N: Quote) chief Jac Nasser.

Kloppers also said BHP (BILJ.J: Quote) planned about $10 billion in capital and exploration spending during the current financial year to end June 2010, little changed from the previous year when spending was $10.7 billion. On Oct. 21, BHP declared force majeure at Olympic Dam, the world's No. 4 copper mine, and reported near-flat quarterly output of iron ore. (Editing by Rupert Winchester and David Holmes)

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