You are here

Mining giant BHP outlines plans to cut costs

bhpreu12.jpg
BHP Billiton on Monday outlined plans to cut costs further as the world's biggest miner battles falling commodity prices, pointing to its planned demerger as helping to drive productivity gains.

[SYDNEY] BHP Billiton on Monday outlined plans to cut costs further as the world's biggest miner battles falling commodity prices, pointing to its planned demerger as helping to drive productivity gains.

The Anglo-Australian resources group is aiming to simplify and strengthen its business, and said it was looking to save US$4 billion (S$5.2 billion) a year in running costs - US$500 million more than previously flagged - by the end of the 2017 financial year.

Chief executive Andrew Mackenzie said the proposed spin-off of some poorer performing assets, including aluminium, manganese, silver and selected coal and nickel operations, would allow BHP to better organise operations.

"By significantly simplifying the portfolio the proposed demerger will allow us to redesign BHP Billiton and create an organisation that supports better productivity," he said in an investor presentation.

"The group's core assets (such as iron ore and copper) generated more than 96 percent of operating profit in the 2014 financial year, so we can cut complexity and lower costs without losing the benefits of scale and diversity.

"Put simply, we can organise a company that operates 12 large, core assets differently to one with 30 operated assets of varying sizes across a broader range of commodities." A vote on the demerger is expected in May.

The US$4 billion productivity gains are expected to include a reduction in cash-costs of US$2.6 billion a year, Mackenzie said.

The company also plans to cut exploration costs from US$14.8 billion to US$13 billion by the financial year ending June 2016 "with no impact on growth".

BHP shares were up 3.85 per cent to A$32.92 in mid-morning trade.

AFP