BHP Billiton chief executive Marius Kloppers yesterday admitted the miner was wrong to pledge $US80 billion ($82bn) on projects such as the Olympic Dam expansion and an outer harbour at Port Hedland, saying the current economic conditions had made the resources giant more cautious on its spending outlook.
"This is a conservative, low-risk company," Mr Kloppers said yesterday, adding that most companies "blow themselves up" because they were overly exuberant rather than overly pessimistic.
Mr Kloppers's comments signal that the BHP board is almost certain to delay spending on some of its major new projects in Australia - including the $30bn Olympic Dam copper and goldmine expansion in South Australia and the $20bn outer harbour for iron ore exports in the Pilbara - amid the latest round of global economic uncertainty.
The admission came as Mr Kloppers cast fresh doubts over Wayne Swan's promise to deliver a $1.5bn budget surplus in 2012-13 through the controversial mining tax that starts next month. He said BHP would escape paying much of the tax if iron ore prices continued to weaken and the Australian dollar remained strong.
"It is almost impossible to forecast," he said of BHP's expected contribution to the minerals resource rent tax. "It is a highly volatile tax."
The federal Treasurer last month downgraded expected MRRT revenue from $10.6bn to $9.7bn over the first three years, but analysts have questioned this figure and claim the big miners could pay less due to generous depreciation allowances.
The Gillard government has said previously that the three big companies that helped design the MRRT - BHP, Rio Tinto and Xstrata - will account for about 90 per cent of the revenue.
Mr Kloppers conceded BHP had erred last year in promising $US80bn in capital spending over four years, before China's economy began to slow and commodity prices retreated. "We said to the market (18 months ago) we are going to do all of these things - what we should have said is we have the ability to do all of these things, should the conditions be right," he said.
"We just don't want to make that mistake in reverse by saying we will do this on that date."
Mr Kloppers would not comment on whether the BHP board would approve construction of the Port Hedland outer harbour by the end of the year, but he said the iron ore price would play a crucial role in whether it went ahead.
Iron ore is trading at about $US135 a tonne - down from a high of $US180 last year - but some analysts have forecast it could fall below $US100. "We may or may not approve the outer harbour by the end of the year," Mr Kloppers said. "If the iron ore price goes to $US80 tomorrow, we probably won't."
Despite his bearishness about future expansions, Mr Kloppers said there were no signs that customers were cancelling orders and he believed Australian iron ore producers were well placed to continue to meet Chinese demand in the long term.
"We've got lower demand overall from a global perspective and that means supply conditions in some products are clearly different from what they were in September of last year," he said. "But customers are continuing to perform. I just looked at our overdues. They are extremely low . . . which means that customers are continuing to pay."
Earlier, Mr Kloppers told a Perth business breakfast that Australians' reluctance to move to work in the mining industry was just as important to the nation's economic future as the debate over boosting productivity.
He believed Australians were less likely to leave their families to work in the mining industry than Americans and Canadians.
The debate over interstate migration erupted last month after billionaire Gina Rinehart won government approval for an Enterprise Migration Agreement to import up to 1700 foreign workers for her Roy Hill iron ore project in the Pilbara.
Mr Kloppers said BHP had not yet needed to use an EMA, but he believed policymakers should examine why Australians were unwilling to move to work in the mining industry.
"People are simply not willing enough to move to Western Australia and to Queensland," he said.
Mr Kloppers said there was no single solution to addressing the issue of declining productivity in Australia. "We often think there is one silver bullet that is going to change the overall course of competitivity," he said. "The reality is it's a mosaic of things interacting."
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