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Boart Sees Strong Demand, Downplays BHP Concern

05/17/2012 | 01:07am US/Eastern
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--Boart Longyear says seeing no slowdown in mining-sector spending

--CEO says market dynamics haven't changed

--Downplays comments from BHP Billiton, which backed away from $80 billion capex plan

--Reiterates full-year guidance for 29% rise in Ebitda

(Updates with BHP remarks from 7th paragraph, CEO comments from 9th.)

By Rhiannon Hoyle

Of

Demand for mining services remains robust in spite of the uncertain global economic outlook, the chief executive of Boart Longyear (>> Boart Longyear Ltd.) said Thursday.

Craig Kipp said there was no sign of waning demand for mining services such as drilling, as the company reiterated its full-year guidance.

His remarks are in sharp contrast with those of BHP Billiton Ltd. (BHP, BHP.AU), whose Chairman, Jacques Nasser, said Wednesday that a lack of certainty over the economic outlook may force it to back away from an ambitious $80 billion five-year capital-spending plan.

Kipp downplayed Nasser's cautious comments, saying that while he'd seen softer demand from smaller juniors--some of which have had problems with financing in the current climate--exploration spending among the world's largest mining companies hasn't weakened.

"We've not seen any change in the market dynamics," Kipp told reporters at a press conference in Sydney on Thursday. "We still see very strong demand, particularly from the majors."

Boart Longyear is a key provider of mineral exploration drilling services and drilling products to mining companies. It has a market value of 1.44 billion Australian dollars (US$1.43 billion).

Nasser Wednesday said BHP management has been rethinking its capital-expenditure plans "every day" as the global economic climate has rattled markets and uncertainty within the Australian mining sector clouded its outlook.

But Kipp's observations paint a different picture.

"We haven't heard from a lot of the majors outside of Australia that there is a change in their plans, budgets, or that there is a massive realignment of their expectations," he said. "We just haven't heard that."

Kipp suggested that Nasser's remarks, at an Australian business lunch, may have been just "a bit for local consumption". He wouldn't say if he thought the comments were politically motivated.

While the uncertain economic environment had forced Boart to contain its fixed costs, he said management felt comfortable that the company would be able to meet its full-year targets. Boart expects to lift earnings before interest, tax, depreciation and amortization by 29% to $460 million in 2012, the company said.

-By Rhiannon Hoyle, Dow Jones Newswires; 61-2-8272-4625; rhiannon.hoyle@dowjones.com

Stocks mentioned in the article : Boart Longyear Ltd.
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