BHP targets further spending cuts

Diversified miner BHP Billiton has told investors it is planning to reduce expenditure by a quarter, with more cuts to come next financial year.

Chief executive Andrew Mackenzie said the company is looking to shave 25 per cent off capital and exploration spending this financial year, adding the company’s level of investment will decline again in 2014.

“A 25 per cent reduction in capital and exploration expenditure is planned for this financial year and our level of investment will decline again next year,” he said.

Mackenzie said the company will forge ahead with its productivity agenda.

“By generating more volume from our existing equipment and lowering unit costs, we will continue to build on the US$2.7 billion reduction in controllable cash costs delivered in the 2013 financial year,” he said.

Iron ore

Efforts to improve efficiency are being focussed on the company’s Western Australian iron ore operations which Mackenzie explained are on track to achieve 13 per cent production growth in FY14.

Its Jimblebar mine delivered first iron ore in the first quarter of this financial year, six months ahead of schedule and the WA iron ore production guidance was recently lifted to 212 million tonnes.

BHP said it is now targeting “capital efficient growth” at its WA operations, looking to increase supply chain capacity to between 260 and 270 million tonnes per annum.

Working towards this goal the company is replacing two shiploaders at the cost of $301 million and is executing a debottlenecking project to unlock over 20 million tonnes per annum across its iron ore portfolio.

The company also hinted at expanding its new Jimblebar mine, lifting production from 35 million tonnes to 55 million tonnes per annum.

But BHP Billiton said investments will be made “selectively”.

“The majority of capital will be directed towards lower risk, high return brownfields projects,” the company said.


With coal prices remaining flat, BHP’s coal production guidance remains unchanged.

Coking coal output is set to rise nine per cent year on year while thermal coal production will remain unchanged at 73 million tonnes.

The company said its Queensland coal supply chain is currently running at capacity but says it is working to increase capacity to 66 million tonnes by the end of 2014.

Experiencing three roof falls in four years, BHP said its Dendrobium underground coal mine in New South Wales is getting back on track.

“Illawarra Coal’s Dendrobium mine has restarted longwall production following recent operational challenges,” the company said.


Turning to copper, BHP said a maintenance outage at Olympic Dam next year should improve the smelter’s performance.

The SMH reported Mackenzie has been “very frustrated” by the poor performance of the smelter.

BHP said it expects to produce 1.7 million tonnes of copper this financial year, adding major projects at Escondida in Chile remain on schedule and budget.

To keep up to date with Australian Mining, subscribe to our free email newsletters delivered straight to your inbox. Click here.