One thing worth noting yesterday on the BHP Billiton results, I do not think I explained it properly (not great), with regards to net gearing at year end, which was 9 percent. But post this recent acquisition of Petrohawk Energy, net gearing is now 27 percent. There was one thing that completely outraged me, it was the exact point that Paul had made before Marius Kloppers, the BHP Billiton CEO was interviewed on the American version of Squawk Box, the usual hosts are all away, so Michelle Caruso-Cabrera is one of the current replacements.
I kid you not when Marius Kloppers (in his robot like Nataniel speaking way) comes to the interview, her first question to him is "You're a big company that does a lot of things, but we're obsessed here in the United States about gold and the price of gold. You're a gold miner. What are you seeing in that market and what you're making in the assumption of future pricing?" No, I kid you not, here is the interview (with the transcript which I copy and pasted in the question) BHP Billiton CEO on Earnings. So who got that wrong? That she really thought that they were a gold miner? Why? And Paul said, they should move to New York, hire an American and get a new set of shareholders, that are not afraid to re-rate the shares. Would that work? When the smart people do not know what the worlds biggest mining produces, well, makes me think that might be so.
From the earnings call transcript I read something very interesting, when Kloppers was asked about the world energy market, the response was almost visionary. Yes. Visionary, tell me what you think about this:
A little difficult to generalize, but let me step back. Modern life consumes more energy. That's the convenience that affluence buys us in terms of having heated homes, travel and comfort. And obviously, the world is working out how to minimize the energy usage at a given standard of living through efficiency, technology and so on and so on. But energy usage grows all else being equal with GDP because people consume more energy as they try and be more comfortable and live a more modern life.
In that context, the world will make energy choices and what I will say is the world has pretty much use copper for various applications for the last 5,000 years or so. But we moved through wood and whale oil in a relatively short period of time which means that the choices that the world has to make in the energy space are more dynamic than perhaps the choices it has to make on the metal side or perhaps the metal usages patterns as such that while there's slight changes in consumption rates differentially between metals, there's not widespread, one metal completely pushes out another one.
Where in energy, that has happened and will happen again. We don't know how those things will happen, but there is no energy source I think at the moment that is entirely issue free. On the one hand of the spectrum, you've got land access issues and carbon intensity on coal. You've got land access issues and other environmental issues to be addressed in the gas space. You've got geopolitical things in the liquid fuel space. And on the uranium side, we've got various issues around the nuclear space.
Our general view is that we tried to be in all of those energy spaces. We try not to put all of our eggs in one basket. I think on balance, our capital allocation will probably be somewhat skewed to lower carbon fuel sources over time. Not that we will stop to investing in energy coal, quite the contrary. But if I look at the total portfolio investment basis, lower carbon fuel is probably likely to go up as a proportion and our basic strategy is just to continue to adjust investment patterns as we go along. That probably doesn't give you a lot of additional insight, but that's how our strategy works as a company.
I absolutely loved this answer on future and past energy trends. And shows what their (BHP Billiton's) thinking is on gas, where they have gone big.