JOHANNESBURG (miningweekly.com) – The world’s biggest mining company is pulling in its investment horns.
BHP Billiton chairperson Jac Nasser says that the investment climate has changed since the company spoke of spending $80-billion on project growth by 2015.
“As much as some wish it wasn’t, the resources business has always been and will always be a cyclical business,” Nasser says.
While the tailwinds of high commodity prices have contributed to record mining growth, he forsees moderating prices easing even further.
Nasser was addressing the Australian Institute of Company Directors, in Sydney, shortly after BHP Billiton CEO Marius Kloppers told a Bank of America Merrill Lynch conference in the US that the light had turned amber for additional investment in iron-ore, the company’s largest profit engine.
While Chinese crude steel production is still expected to reach 1.1-billion tons a year by 2025, Kloppers says it now equates to a lower 650-million-tons-a-year rate of growth in the demand for global seaborne iron-ore, down on the 800-million-tons-a-year rate of the last ten years.
The company foresees low-to-negative growth in demand for seaborne iron-ore beyond 2025 and Nasser identifies the impediments to investment as higher costs, lower productivity, higher taxes and ongoing volatility and uncertainty.
He hypothesises that the 2008 global economic meltdown is not a mere short-term glitch, but a structural shift that has seen the Prime Ministers of Greece, Italy and The Netherlands resign; incumbent governments voted out in the UK, France and Spain; the Governor of the Bank of England declare an end to 50 years of rising living standards; and the eurozone undergoing change previously considered unthinkable.
Rather than the world settling down, he foresees it facing increasing uncertainty.
“It’s going to feel as if the ground is shifting under our feet,” says Nasser, who bemoans Australia becoming one of the world’s higher-cost countries, where mineworker unrest in BHP Billiton’s Queensland coal business alone totalled 3 200 incidents of industrial action last year, with less than 24-hours notice being given for the withdrawal of half of the 1 000 industrial-action notices.
He is disappointed that the public comment is focused on taxation and wealth redistribution rather than wealth creation, which he sees as unhelpful for an industry that has to make large-expenditure and long-term investment decisions.
BHP Billiton is not only choosing the commodities in which it will invest, but also the countries.
While Kloppers cautions on iron-ore investment, he keeps the green light on for copper and while Nasser has taken the $80-billion investment figure off the table, he declines to reveal the new capital target.
Edited by: Creamer Media Reporter