SYDNEY (AFP) – Mining giant BHP Billiton said Monday it planned to cut costs and lift production at its Western Australian iron ore operations as it aims to be the lowest cost supplier to China.
Iron ore prices have fallen sharply this year amid increased production, but BHP iron ore president Jimmy Wilson said the firm wanted to lift capacity in Western Australia by 65 million tonnes per year.
“The economics of further increasing our production are compelling,” he said.
“We completed our major supply chain investments some time ago and have since focussed on using BHP Billiton’s benchmarking systems to improve the performance of our equipment by systematically tackling the bottlenecks.”
Wilson said the company had already significantly cut the cost of production at its Western Australian Iron Ore (WAIO) operations and planned to go further.
He said he expected unit cash costs of less than US$20 per tonne (excluding freight and royalties) in the medium term, “a reduction of more than 25 per cent on the average achieved in the 2014 financial year”.
Wilson said BHP’s four major iron ore mining hubs in resource-rich Western Australia required a lower level of ongoing capital expenditure than those of its rivals.
“With annual sustaining capex of approximately US$5 per tonne over the next five years, we aim to be the lowest cost supplier to China on an all-in cash basis,” he added, referring to the price once freight and royalties are factored in.
He said BHP Billiton could add 65 million tonnes of capacity at its Western Australian mines, taking total system capacity from 225 to 290 million tonnes per annum by the end of the 2017 financial year for a low capital cost.
BHP Billiton continued to see healthy demand growth for iron ore in the mid-term as Chinese steel production is expected to rise by about 25 per cent in the early to mid-2020s, he added.
“Meanwhile, steel production growth in other emerging economies is outpacing China as those nations urbanise and industrialise,” he said.
The world’s biggest diversified miner, BHP has cut hundreds of jobs in recent years, announcing last month that it would lay off 700 workers at coal operations in central Queensland as it seeks cost efficiencies.