Productivity push on four pillars
For Andrew Mackenzie, BHP Billiton's Pilbara iron ore unit is a gift that seems to keep on giving.
All but lost amid the news a fortnight ago the world's biggest mining company would downsize by spinning off smaller, non-core assets into a new entity, NewCo, BHP again raised the ceiling for output from its Pilbara iron ore powerhouse.
A business that this year should be producing about 245 million tonnes of the steel commodity should be able to creep to 290mtpa in short time at likely the lowest incremental cost in modern Pilbara history.
It defines Mr Mackenzie's BHP focus on four pillars - iron ore, copper, Queensland coal and petroleum - and a demand that his divisional managers squeeze as much extra capacity and productivity out of their operations as possible before going cap in hand to the board asking for capital.
Speaking with _WestBusiness _yesterday, Mr Mackenzie would not discuss the cost of boosting his Pilbara unit's capacity to 290mtpa but described it as a "creep . . . by making (our operations) more productive".
Productivity is an industry buzzword and one BHP's chief executive of the past 15 months has taken a shine to, along with Nobel laureate Paul Krugman's dictum that "productivity isn't everything but in the long run it is almost everything".
"The aggregate capital efficiency (of increasing his Pilbara output to 290mtpa) will be less than $US50 for an additional annual tonne, which is way better than anything else in the industry," Mr Mackenzie said, flagging a figure half of what the industry's, including BHP, past major Pilbara expansion cost.
Jimblebar, BHP's newest and most important mine, will be expanded from 35mtpa to 50mtpa as expected but the rest of the gains will be through tweaking and sweating operations including rail and port infrastructure.
"The more we can raise performance through increased utilisation, the more that ($US50/t) number goes down," he said.
"And it's quite important that Jimmy (Wilson, BHP's iron ore boss) and I delay the investment of capital until we really feel we've got the most we can get through no capital, through increasing throughput through a better utilisation and people being more productive, machines being more productive and so on and so forth."
Mining iron ore is yesteryear's practice. Today is it an advanced manufacturing process.
For all the enthusiasm with which the word has been adopted across the resources industry, a mere mention of productivity sends shudders down a workforce reeling from rolling cost-cutting drives. BHP, along with Rio Tinto, has slashed hundreds of jobs in WA though both companies remain coy on the exact quantum.
"Huge amounts of what we're doing is just making the average performers of our company rise to the best performers, rather than even looking outside our company (for tips on improvement)," Mr Mackenzie said.
"(Productivity) saves jobs because it improves your competitiveness, it means you retain and you grow your market share and you become more attractive for further investment."
The BHP boss says the rivalry with Rio, regarded as the Pilbara's best operator, is "very healthy".
"I tend to think that every day Jimmy Wilson and (Rio iron ore boss Andrew Harding) are playing in the grand final," he said.
"I think that's wonderful for Australian competitiveness and it's good for both companies."
Every day Jimmy Wilson and Andrew Harding are playing in the grand final. That's wonderful for Australian competitiveness."
Andrew Mackenzie
