New | BHP plans to slash iron ore production costs
Miner targets savings of over 25pc and aims to make its iron ore output more productive
BHP Billiton aims to cut its iron ore production costs by more than 25 per cent and squeeze more tonnes from its mines as it aims to overtake rival Rio Tinto as the world’s cheapest producer, the world’s largest miner said on Monday.
BHP, the No 3 iron ore producer behind Brazil’s Vale and Rio Tinto, outlined the cost-cutting and expansion plan even as iron ore prices have slumped 42 per cent this year, as it sees demand picking up over the medium term.
“We will continue to squeeze the lemon because at the end of the day it’s just so value accretive,” Jimmy Wilson, the head of BHP’s iron ore division, said in a video conference before an analyst tour of its West Australian mines.
The focus of mining companies has shifted towards cost cutting as iron ore prices have dropped from about US$190 a tonne in 2011 to less than US$80 now, sinking to five-year lows as supply growth from the major miners has exceeded demand growth by more than two to one.
BHP said it could boost its annual output rate from 225 million tonnes at the end of 2013 to 290 million by June 2017.
At the same time, it expects to cut the cost of that expansion to about US$30 per tonne, or overall capital spending of about US$2 billion, which is well below a previous estimate of under US$50 a tonne.
