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Productivity push vital amidst falling coal prices: BHP

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President of BHP Billiton’s global coal arm has highlighted the importance of productivity and a high-performing culture against a backdrop of lower coal prices and rising costs.

Speaking at The Committee for Economic Development of Australia (CEDA) in Brisbane, Dean Dalla Valle, said while demand for coal would continue over the next 20 years, prices are likely to remain low as result of oversupply.

The coal chief said most of this demand would come from outside of China from places that do not have large metallurgical coal resources, like India.

Demand for energy coal is expected to grow from the 5.4 billion tonnes produced today to 6.3 billion tonnes over the next 20 years.

Valle said Australia was well-paced to be part of this global growth, but warned unless the nation can become more competitive, it would lose business to other low-cost suppliers.

He said the adjustment to lower prices has been difficult for both Queensland and New South Wales operations, with job losses impacting the sector and related flow-on effects for supporting industries and the local economy.

“Over the past 18 months we have focussed on our cost base throughout our operations and there is still more we need to do as we continue to look for ways to improve the productivity and competitiveness of our mines,” he said.

“The process we are undertaking is essential to ensure that we have a viable and sustainable industry over the longer term.

“After all, the best security anyone can have is to be part of a profitable and sustainable business.”

Valle revealed it costs BHP 1.5 times more to employ a truck driver in the Bowen Basin, then in the U.S.A, highlighting just one of the challenges facing the local sector.

“We must always remember that the world sets our prices and Australia sets our costs.”

Valle said BHP was examining its coal business at a “micro level” in order to find efficiencies.

“Modernising coal mining in an era of productivity gains requires us to work smarter to ensure we deliver long term productivity gains,” he said.

“To do this we need high performing teams and ensure our people have the opportunities to develop their careers through mobility in the industry.

“We need to critically examine the impediments to achieving this.”

Valle said there were also opportunities to improve productivity across the coal supply chain, including the costs of rail, trucking and shipping.

“Productivity improvements will be essential if we are again going to produce the returns required to attract capital to sustain existing operations to maintain current production levels, and to improve the business case for new coal mines in the future,” Valle said.

Valle pointed to new integrated systems and processes, and reshaping workplace cultures as ways the major miner was addressing productivity issues.

He referenced the company’s new commute workforce at Daunia Mine as an example of a new operation where a great culture is being built to help deliver productivity gains.

“What is evident when you go to Daunia is that when you bring a diverse, enthusiastic group of new people to our industry and blend them with experienced miners and the right training and supervision, a new culture develops.

“It also helps us increase our diversity as we re-shape our workforce, strive to better reflect the make-up of our society and spread the benefits of mining across Queensland.”

Valle said BHP had an important role to play in helping the world develop and to improve global living standards.

He said a fifth of the world’s population lacks access to reliable modern energy, with 700 million people in sub-Saharan Africa still relying on burning wood or charcoal to cook and heat their homes.

“In the next 20 years, we expect 1.7 billion people to gain access to electricity for the first time,” Valle said.

“Coal remains one of the lowest cost forms of power generation and will remain critical to the provision of this electricity.”

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