Boom-time chiefs call it quits
Mining chiefs moving on
Marius Kloppers will step down from his role as BHP Billiton chief executive on May 10 and will leave the company on October 1. During his reign BHP's ASX share price has fallen 15 per cent. However Mr Kloppers' departure had been flagged for some time. Photo: Alex Ellinghausen
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With today's resignation of BHP Billiton boss Marius Kloppers the reign of the mining boom-time chief executive is coming to an end.
The generation of executives that oversaw a rapid expansion of the mining industry like no other before it is being replaced as mining giants steer into the post-peak period.
The mining giants reaped huge profits during the boom years. In 2011, BHP reported a profit of $22.86 billion and hit a market cap of more than $200 billion as iron ore prices skyrocketed from around $US60 per tonne in 2009 to a peak of $US191.90 per tonne in early 2011.
But the good times couldn’t last forever and commodity prices retreated from their peaks, while chief executives oversaw hefty write-downs and the delaying of mega projects.
While Mr Kloppers seems to have had the good fortune of being able to influence the date of his departure - BHP chairman Jac Nasser today noted a succession plan for Mr Kloppers had been in place for some time - several of his peers were pushed out of their jobs.
Tom Albanese, who became Rio Tinto chief in 2007, was pushed out of the top job earlier this year after the company’s $14 billion write-down over its aluminium business and Mozambique coal investments. After posting a $13.76 billion profit in 2010, the miner has seemingly struggled to deal with the post-boom world, recording its first ever loss in 2012 of $2.89 billion.
Rio’s market cap has fallen from a peak of $151.26 billion in 2011 to $101.37 billion in late 2012.
Others chief executives of mining majors who have felt a tap on the shoulder include Anglo American’s Cynthia Carroll, who lost investor confidence due to lower-than-expected returns, Vale’s Roger Agnelli, who was forced out by a nationalist Brazilian government and Xstrata’s Mick Davis, who will be squeezed out when his company merges with Glencore.
The mining industry is now facing the post-boom world and it seems the company boards believe change at the top is needed to help them tackle this brave new world where super profits, in comparison to boom times, are a thing of the past.
NAB resources analyst Michael Bush said it was unlikely that the major miners would move in completely different directions with their new chief executives.
Mr Bush said the two key issues major miners would face over the coming years were balancing shareholder demands for immediate cash returns with tighter capital and nationalisation.
The trend for governments to look for larger slice of the mining pie had become a common theme, highlighted last year by Bolivia nationalising a mine run by Glencore.
Mr Bush said that major shareholders understood that the returns of the previous five years would not be repeated but there was still a lot of money to be made.
‘‘Have a look at the margin returns, some people were concerned over margins in some of the businesses, but you’re still looking at 30 per cent margins, that’s still healthy,’’ he said.