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Glencore's billionaire Chief Executive Ivan Glasenberg wants the mining industry to learn from past mistakes after a $1 trillion spending spree left the world awash with metals.
Growth for the metals industry should mean cash flows and earnings, not digging up as many tons as possible, Glasenberg said in a presentation on Tuesday. Profit can be improved by accepting lessons from the 12 years when mining companies poured cash into boosting production of everything from copper to iron ore.
"Accept that volume growth cannot be an end in itself," according to Glencore's slides from the Bank of America Merrill Lynch mining conference in Miami.
Under a headline of "Recipe for Better Returns," the company wrote that management incentives in the industry need to encourage "rational behavior."
Years of debt-fueled investment in mining resulted in a massive oversupply of commodities at the same time that China's economy hit the breaks. The rout in prices that followed forced mining companies to slash debt, cut costs and sell assets. In just five years, the FTSE 350 Mining Index saw more than 70 percent of its value disappear.
Capital allocation going forward needs to be more conservative and based on cash generated, Glencore said.
"The future can be different," according to the presentation slides. "Doing nothing on growth is often the best outcome."
Glencore shares have rebounded 48 percent this year as some commodities recovered and the company took steps to lower debt. It's still down 74 percent since a $10 billion initial public offering five years ago.
As companies lower production, spending by the world's top five diversified miners is set to total $24 billion this year, down from a peak of $71 billion in 2012, according to Glencore. Cost cuts across the board are reaching the limits of what is possible, Andrew Mackenzie, BHP's chief executive officer, said in a separate presentation.
It's not the first time Glasenberg has offered his reflections on the mining industry. Last year, he remarked that miners should understand the concept of supply and demand. In 2013, he said mining chiefs had "screwed up" by flooding the world with raw materials.