Obviously productivity is high on Mackenzie’s agenda because, according to a recent study by PricewaterhouseCoopers, the industry was generating 56% less per hour of work in 2012 than it was in 2002.
Part of this is due to capital investment. Part of it is due to the skills shortage.
Looking at coal, another part is the existence of multi-user infrastructure in the coal logistics chain.
One of the problems he will face in the coal side of the business is the union problems.
Successive Labor governments have built up the union’s power to the point where there have been reports that BHP management is having to negotiate with unions over workers’ rosters.
If this continues miners are going to have to look at getting Haagen-Dazs franchises into their canteens or run the risk of serving the same flavour of ice cream two days in a row. Just ask Pilbara veterans how that went back in the 1980s. It was a case of everybody out.
Besides industrial relations though, it was worth comparing the Pilbara iron ore operations with the east coast coal ones.
It is also worth considering BHP’s iron ore rival Rio Tinto – which is widely held up as an ideal when it comes to iron ore mining.
After all, both coal and iron ore are essentially logistics businesses. Sure there are some efficiencies to be had in the pit but the real benefits come from getting it from the pit to the port.
In the west both BHP and Rio are masters of their own destiny. They control everything from the pit to the port.
In the east, however, when the product leaves the mine gate it is at the mercy of third party rail and port operators.
There is a classic example from Rio Tinto’s Mine of the Future project.
Thanks to the remote operations centre it set up, every part of its iron ore operation was literally on a wall in that centre.
This level of oversight led to a 70% improvement in schedule reliability in the iron ore business from 2008.
It also allowed the company to identify bottlenecks in the operation.
In one case there was a bottleneck around the car dumpers at the ports. Previously there had not been the level of oversight to identify such problems but once all of that information was channelled through the one point, it became obvious.
How a BHP under Mackenzie will handle this productivity issue of multi-user infrastructure remains to be seen.
On the investor relations front he may get some help should there be a change of government though.
