Top global miner BHP Billiton's chief executive sees iron-ore prices staying strong for as long as two years, and is confident the company's profit margins will remain robust, even as costs escalate.
Marius Kloppers was bullish on the near-term outlook for iron-ore prices due to supply constraints, with India not exporting and rivals having held back investment in new capacity during the global financial crisis.
"But what I can say is there are certain products in our portfolio, particularly in iron ore...which looks very, very good over the next three, six and nine months," Kloppers said on Australian television in an interview recorded after the company reported a record first-half profit of $10,7-billion.
"Simply put, over the next 12, 18 months, perhaps two years, there's not a substantial amount of new capacity coming on, and it's more an issue of the supply side rather than the demand side," he said.
His counterpart at rival Rio Tinto was more specific a week ago, forecasting that tight supplies would keep iron ore prices high in the near term, but prices would fall below $100 a tonne from current record highs around $190 a tonne when mine expansions are completed in 2014 and 2015.
BHP announced this week it would spend $80-billion on mine developments and expansions over the next five years, and Kloppers said based on expected returns on those projects, it should be able to post compound growth of 5% to 6% a year for "many many years".
"For us it's a question of where cost structures go, but I feel very comfortable that we're going to have healthy margins going forward," Kloppers said on Australian Broadcasting Corp's Inside Business show, aired on Sunday.
BHP had a 44% profit margin in the first half of this financial year.
Kloppers played down talk that the company had put acquisitions on the backburner in favour of investing in its own projects, saying while takeover targets were expensive now based on lofty commodity prices, that may not last long.
Asked if mergers and acquisitions were off the agenda, he said: "No. Cycles change."
"In six months' time or a year's time, something else may come up, the situation may change."
After being forced to kill three mega-deals since 2008 due mainly to regulatory and political obstacles, Kloppers said the company would clearly run into problems if it chased an iron ore acquisition, like its abandoned bid for no.2 iron ore miner Rio Tinto.
But he saw no such obstacles for deals in products where BHP was less dominant, including potash, copper, and oil and gas, as industry experts have speculated.
"And obviously, the oil and gas market is a very large one where there may be opportunities going forward," he said.
Speculation has focused on BHP chasing Anadarko Petroleum for its assets in the Gulf of Mexico.
Kloppers deflected questions about diplomatic cables released by WikiLeaks, which showed he had offered to trade intelligence on China with Washington, as he was concerned about Chinese spying on BHP.
"I certainly don't remember offering anything," he said.
Did he have any secrets to offer? "Not that I know of," he said.