BHP to cuts costs by $US2.3bn

BHP Billiton is targeting its cash costs and has re-shuffled some the company’s top jobs in order to prepare for the upcoming demerger.

BHP said it will cut $US2.6bn in cash costs as the company targets productivity led gains of at least $US4 billion per year by the end of 2016-17.

The company also revealed capital expenditure would be cut by $US1 billion to $US13 billion in the 2016 financial year with no impact on growth.

Revealing the plans to investors in Sydney today, BHP chief Andrew Mackenzie described the productivity gains as a “step-change”.

He said it means the company can produce more at lower costs.

In a shake-up of the top jobs, former coal boss Dean Dalla Valle is set to become the marketing, health, safety and environment boss as of January 1 2015.

Current marketing boss Mike Henry will take Dalla Valle’s role as the head of the coal division.

Meanwhile the current aluminium boss Daniel Malchukwill become the copper chief as of March 1 2015.

BHP said it has made good progress in securing regulatory approvals required to proceed with the demerger, with the Australian Foreign Investment Review Board and the Australian Taxation Office giving the green light.

Under demerger plans, BHP will create a new company that will take its aluminium, manganese, nickel and silver assets.

Coal mines in the Illawarra region of NSW are also expected to shift to the new company.

This will leave BHP to focus on its core pillars of r iron ore, copper, coal and petroleum.

Mackenzie said the demerger was an important step for the company.

“It will allow us to improve the productivity of our largest business more quickly and create a new company of global significance that is well positioned to maximise the value of its high-quality assets,” Mackenzie said.

The company will hold a vote for investors in May to vote on the demerger plans.

Chair of the new company David Crawford said the name and proposed directors will be announced before shareholders are asked to vote on the demerger.

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