Falling commodity prices already have the nerves of investors jangled, but BHP Billiton’s boss says the company is banking on more falls.
The world’s biggest miner’s chief executive, Marius Kloppers, said the company had never been as bullish as others about China’s rate of growth.
However, he still believes China offers attractive opportunities now that its economy has slowed.
The mining giant’s decision last week to shelve the massive $US20 billion ($A19.2 billion)-plus Olympic Dam mine expansion had some commentators declaring the end of the mining boom, amid a slowing China and soaring mine operating costs.
“We go through a pretty rigorous process to pick those long-term prices, but if I have to generalise they are, by and large, lower by today’s prices,” he told ABC TV’s Inside Business.
“Quite candidly, it makes a smaller difference to us than people commonly think.
“We are a business that takes capital, takes a long-term view of where prices and demand is going and invest that in the products that are going to be most in demand.”
The emphasis for today was on cost-control in anticipation of prices that would “mean revert” lower, he said.
“We believe that while the absolute demand growth for products is going to be lower than we’ve seen in some recent years, we still believe that they are very attractive opportunities for our company and indeed for Australia,” Mr Kloppers said.
“Now I caveat that in one way, which is we have never been as exuberant as others. We have always been in a `we have to sing for our supper’ kind of a world, so that’s pretty much still where we are.”
The company said last week it needed to improve the mining technology it would use at Olympic Dam to reduce costs if it was to be economically viable again.
That effectively means it is starting again from an engineering point of view, which would delay the project for at least two years and it would need government approval.
To offset lower prices, Mr Kloppers said he would be unhappy if the company could not grow volumes by about 10 per cent in each of the next two years in its core products – iron ore, coal, oil and gas, and copper.
The only other commodity it wanted to become a profit driver was its Canadian potash project, he said.