Kloppers retreat hits confidence

BHP's decision to slam the brakes on its Olympic Dam expansion confirms the fact the mining boom has moved into a lower gear.

BHP Billiton's decision to slam the brakes on its Olympic Dam expansion amid other cutbacks confirms the fact the mining boom has moved into a lower gear but also raises question marks over the company's decision-making.

In a short time chief executive Marius Kloppers has gone from being maximum bullish to almost gun-shy, which doesn't do a lot for investor confidence.

The initial market reaction was positive because he has shown an ability to adjust to the new reality, which is an undeniable slowdown in China.

At a time when business is demanding long-term decision-making from government, BHP has shown perhaps commendable caution, which won't please the politicians.

For a federal government hoping for the economy to continue to improve, the project cancellation is a bitter blow.

But it is by no means the end of the resources boom, which is alive and well, just at a slower pace than the politicians had hoped for.

Big writedowns on its shale gas acquisitions earlier in the month told the story, with BHP almost moving into defence mode. The reassessment of Olympic Dam is shattering for South Australia as the project was being relied on to carry its economy for the next few years. It is not dead but politicians must understand they are not in control of the project.

Kloppers has made cutbacks elsewhere and, while talking up the long-term outlook, his immediate decisions don't back that confidence.

Resource companies need to make huge commitments for projects that last decades and Kloppers has repeatedly shown this is not so easy. While anti-trust reasons were the main cause, his decision to pull out of the Rio Tinto takeover in the middle of the GFC was blamed on the economic crisis.

Sometimes companies have to place bets through cycles but, while maintaining existing investments, Kloppers -- or maybe his board -- has proved reluctant to do so.

This time last year BHP was talking about $80 billion in new capital expenditure projects, including Olympic Dam, which created some unrest among shareholders. They preferred to get big dividend increases instead.

As expected, BHP delivered neither, with earnings before interest and tax down and dividends up 11 per cent.