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BHP's Kloppers follows rival mining CEOS out of door

by Paul Whitfield  |  Published February 20, 2013 at 9:16 AM
BHP Billiton Ltd. appointed the head of it non-ferrous unit Andrew Mackenzie as chief executive to replace Marius Kloppers, the architect of the world's leading mining group's troubled expansion into shale gas and almost $170 billion's worth of failed bids.

Kloppers will step down on May 10 after almost six years as CEO, the latest move in a changing of the guard that means all four of largest London-listed mining companies have replaced their CEOs in recent months, or plan to.

"There is no doubt it is a sector shift from largely disastrous expansion to getting the best out of those deals by improving operations and cutting costs," said a U.K.-based mining analyst who asked not to be named. "Klopper's legacy is mixed. His expansion into shale gas is still to prove itself and, while BHP outperformed rivals [during Klopper's tenure] that bar isn't set particularly high."

BHP's announcement of Kloppers' pending departure comes a month after Rio Tinto Group announced that its head of iron ore Sam Walsh had replaced its CEO Tom Albanese, who paid the price for a disastrous expansion into aluminum that has led to just under $20 billion of writedowns at the world's No. 2 mining company. Mick Davis, CEO of Xstrata plc, will leave his job soon after his company is bought by Glencore International plc later this year, after being outmaneuvered during deal negotiations by Glencore's Ivan Glasenberg, who will replace him. Anglo American plc CEO Cynthia Carrol resigned in October after overseeing a 25% decline in her company's value, partly because of billions of cost overruns at the Minas Rio iron ore project she bought.

"There is no messing around with BHP and there seems to be a cautious, but optimistic view that a cultural change may occur, and perhaps as we have seen from Sam Walsh at Rio Tinto, the word 'shareholder' will be banded more often," noted IG Markets Ltd's Melbourne-based analyst Chris Weston.

Kloppers tenure as CEO is marked by his aborted a $130 billion bid for Rio Tinto Group and a failed $39 billion hostile offer for Potash Corp. that the Candian government blocked. Either deal would have been BHP's largest ever acquisition.

He also oversaw an expansion into shale gas that led BHP to write down $2.84 billion of assets in August and cost him his annual bonus. Kloppers paid $4.75 billion for Cheasepeake Energy Corp.'s Fayeteville assets in 2010 and a year later secured the $15.1 billion acquisition of Houston-based shale gas company Petrohawk Energy Corp.

"Marius was appointed chief executive just prior to the global financial crisis," BHP Chairman Jac Nasser said Wednesday in a statement. "Despite an exceptionally difficult economic environment during his tenure, Marius and his team have delivered for shareholders, significantly outperforming our peers in terms of total shareholder returns."

BHP shares have declined 12% since Kloppers took control of the company in October 2007. That is better than the 18% decline in Rio Tinto's share price, the 38% fall in Xstrata's value and a just over 40% decline in the value of Anglo American.

Mackenzie, who grew up near Glasgow in Scotland, joined BHP under Kloppers from Rio Tinto. He had previously spent 22 years working for BP plc. He said he will continue "the focus on our strategy of owning and safely operating, large, low-cost, long-life assets."

Analsyts welcomed his appointment. "He has a petroleum background as well as mining so is a good CEO fit for BHP," Credit Suisse analysts noted.

BHP underlined the challenge ahead of the new CEO on Wednesday when it announced a 43% decline in underlying earnings to $5.86 billion in the six months ended December. BHP blamed the decline on weaker commodity prices.

BHP said sold $4.3 billion of assets in the six-month period and said it will continue to "selectively pursue asset divestment opportunities."

BHP's London-listed shares traded Wednesday at 2,177 pence ($33.66), down 57.5 pence, or 2.6% on their Tuesday close.

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Tags: BHP Billiton Ltd. | Cheasepeake Energy Corp. | Glencore International plc | Ivan Glasenberg | Jac Nasser | Marius Kloppers | Mick Davis | Potash Corp. | Rio Tinto Group | Sam Walsh | Tom Albanese | Xstrata plc

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