Kloppers appeals to governments

BHP Billiton chief executive Marius Kloppers has told the company’s London annual general meeting that governments need to play their part to restore cost competitiveness in the mining sector.
Kloppers appeals to governments Kloppers appeals to governments Kloppers appeals to governments Kloppers appeals to governments Kloppers appeals to governments

BHP Billiton's Marius Kloppers

Kristie Batten

Kloppers said the company had taken decisive and proactive action to ensure its businesses remained at the lower end of the cost curve, including closing higher cost operations.

“However, the reality is that we cannot do this heavy lifting on competitiveness alone,” he said.

“The cost environment within which we operate is heavily influenced by government policy and regulation.

“It is important for governments to provide stable, predictable policy regimes in our key operating jurisdictions that support our own efforts to reduce costs.”

Kloppers said BHP accepted that it carried the bulk of the task to manage costs, but there had been a “trend” towards governments seeking higher royalties and taxes.

“Governments must also play their part in ensuring that those elements of the cost environment they control provide a competitive framework within which future investment is encouraged,” he said.

“This extends to royalties, taxes, regulatory burdens and productivity-related policies.

“Collaboration between industry and government is critical to restoring cost competitiveness in our sector.”

Kloppers said it was critical to keep costs down in the current challenging environment and there were opportunities for those companies that did as commodity prices fell.

He said there was a rebalancing of demand and low-cost supply underway and a progressive recalibration of prices to more sustainable levels.

“Therefore, we do not anticipate a repeat of the record prices experienced over the past decade,” Kloppers said.

“The industry’s ability to meet incremental demand with low-cost supply has improved and in this regard, the opportunities that lie ahead will be volumetric as opposed to price based.

“What I mean by this is, those who sit at the low end of the cost curve, who are able to expand production in a timely and disciplined fashion, and who can invest in the right portfolio of commodities, can indeed do very well in this environment.”

Kloppers expected negative sentiment to continue to weigh on the market.

However, he said the slowdown in China was in line with the company’s expectations.

“It is aligned with the path taken by other major economies as they have developed, and is what we believe is required to support sustainable growth in China over the longer term,” Kloppers said.

“China’s unique and substantial industrialisation and urbanisation continues to give us confidence in the long-term outlook. “

Despite deferring expansion projects such as the Port Hedland Outer Harbour and Olympic Dam, Kloppers said BHP would continue to invest throughout the cycle.

“We have an unrivalled portfolio of high-quality, long-term development options,” he said.

“This includes 19 major growth projects currently in execution that are largely low-risk, brownfield expansions, in the same assets that have generated industry-leading returns over more than a decade.

“As our expenditure on these projects reduces over time and our level of flexibility increases, we will continue to allocate future capital to those projects that have the most attractive risk/return metrics.”

BHP shares last traded A29c down to $34.08.