The world’s biggest mining company has again stressed to the stock market it wants to extract as much work from its employees and contractors at the cheapest possible price.
BHP chief executive Andrew Mackenzie, in a speech in London overnight, signalled that under his leadership the company will micro-analyse all aspects of its operations, much like a Formula One team does in analysing pit stops to save as much time as possible.
“For us, every 1 per cent improvement in productivity translates to a $170 million saving,” Mackenzie told the Melbourne Mining Club in the British capital. “We do not yet know where the limits of productivity lie but we can be sure that we are not close to them.”
BHP will continue to produce at full capacity through economic cycles. Mackenzie believes this is best for the company’s customers and shareholders.
“Improving productivity is crucial to maintaining this capability,” he said “This productivity improvement has to come from the bottom up, by getting the most out of every truck and every shovel and by making sure our people have the right skills and approach to do their jobs better each day.”
He said most commodities are now traded on transparent markets. BHP now has clear price signals to induce the new production required or perhaps to slow production when it is not.
“More balanced markets require us to get much sharper on operating and capital productivity to expand margins and increase returns, no matter where prices go,” said Mackenzie. “As customers and consuming nations become more confident that they will receive the supply they require, and policymakers understand that we are not about to run out of raw materials, then the conversation will change for the better.”
The BHP chief executive acknowledges that stock markets are skeptical that companies such as his can produce the returns of the past without the higher prices.
“PG Wodehouse once said that it is never difficult to distinguish between a Scotsman with a grievance and a ray of sunshine,” said Mackenzie. “I am not such a Scotsman. I am an optimist.”
BHP’s ADRs rose 0.1 per cent in New York trading. Yesterday in Australian trading the stock dropped 2 cents, or 0.1 per cent, to $33.77.
BHP shares have gained 8.6 per cent in the last 12 months compared to the benchmark S&P/ASX200 Index's 18 per cent rise.
The spot price of iron ore imported through the north-east Chinese port city of Tianjin slid $US2.70, or 2.3 per cent, to $US113.90 yesterday, according to Bloomberg data. That price is down 28 per cent from its 52-week high of $US158.90 on February 20.