A Veteran Mining Exec Told The Industry's New Rich To Get Used To The Booms And Busts

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Those who have been around the mining sector for a long time are quick to tell you Australia’s most prominent industry runs on a necessary cycle of boom and bust.

There’s no better example of this then from BHP Billiton’s Coal President Dean Dalla Valle who, while addressing a CEDA lunch today in Brisbane, gave his two cents on coal in the global market.

While most commodities have been in decline over the past 18 months, coal’s price fall has been dramatic and the shockwaves have spread through Australia’s regional towns, with job losses and shut downs.

Only last week Glencore announced it would be shutting its Ravensworth underground coal operation in New South Wales because of the high Australian dollar and falling coal prices.

On the metallurgical coal front, prices have fallen from more than $US300 a tonne in 2009 to around $US105 a tonne, largely due to increased supply from the US, Australia and China.

Coking coal has fallen from around the $130 a tonne mark in 2011 to about $75 a tonne today. Over the same period demand has increased but so has supply – especially from Indonesia.

Pointing to a career spanning almost 40 years in the mining sector, Valle said the drop needs to be put into perspective.

“I started in mining as a young apprentice at BHP Billiton’s Illawarra collieries, 37 years ago,” he said.

“During my career coking coal prices have been as low as $55 per tonne in today’s dollars – now that’s a scary thought!

“As I visit our operations, I remind people – particularly those who have only joined our industry in the last decade and are now feeling the pinch as prices contract ‐ this is nothing new!”

Valle said during his tenure in the mining sector the industry’s cost base has increased, and the next phase of growth is going to come from technological and productivity improvements — some of which are already starting to filter through.

“I can compare the productivity of a truck and shovel fleet at one of our mines in South Africa against a similar truck and shovel fleet at one of our mines in the Bowen Basin – and more importantly, so can the General Managers at those mines,” he said.

“Using our systems I can identify that it costs our business approximately 1.5 times more for a truck operator in the Bowen Basin compared to the same truck in New Mexico in the USA.” 

As for future demand, Valle said his money is on China remaining a significant importer but in terms of growth, he pointed to India.

“The likes of India, a country not overly endowed with metallurgical coal, [is] anticipated to be the most significant source of new demand,” he said.

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