Going on a crash diet seems great while you’re shedding the pounds. The problem is sticking with it for the long term.
That’s what seems to be happening to the world’s miners, which have spent the years since the commodity boom peaked in 2011 holding down salaries, eking out efficiencies and extracting the highest-quality parts of their deposits to keep costs in line with deflating prices.
The cycle looks to be turning, though: Controllable cash costs at BHP Billiton Ltd. rose by $1.24 billion in the year through June, the company reported Tuesday, mainly because of declines in oil and gas fields, operational problems at two coking coal mines and issues around processing costs at two copper mines.
That was enough to overwhelm the $1.02 billion gain to Ebitda from higher volumes at the company’s two biggest operations, the Escondida copper mine and its Australian iron ore business.
BHP isn’t alone in this. At Rio Tinto Group, operating costs in the six months through June rose $392 million from a year earlier, owing in large part to the increasing price of raw materials for its aluminum business such as caustic soda and petroleum coke. Copper miner Antofagasta Plc saw unit costs rise more than 20 percent in the first half as reduced volumes pushed operations closer to their fixed-cost base.
For the rest of this column: https://www.bloomberg.com/view/articles/2018-08-21/bhp-may-be-straying-from-a-strict-diet-of-cost-curbs