Iron miner BHP cuts costs as it builds capacity

Caitlin Morrison
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MINING company BHP Billiton is aiming to cut costs while increasing capacity at its Western Australia Iron Ore (WAIO) operation, the group announced yesterday.

BHP iron ore president Jimmy Wilson told investors at a tour of the WAIO site that the firm planned to cut unit costs by “at least 25 per cent” to $20 per tonne while increasing the capacity by 65m tonnes per year “at a very low capital cost”.

The Anglo-Australian company is targeting output of 290m tonnes per annum by upgrading and expanding existing infrastructure, in what he termed “the lowest cost expansion opportunity in the industry”.

Wilson stated that the project “will deliver truly outstanding returns for our shareholders”, adding: “With an undeniable sustaining capital expenditure advantage and low strip ratio, we have no excuses, and should be the lowest all-in cost supplier of high-quality iron ore to China.”

He described this as the company’s “unrelenting goal”.

Wilson added: “Long term drivers of demand for iron ore remain intact, albeit these will be outpaced by supply, resulting in a flattening of the cost curve. Our resource position has a distinctive competitive advantage, enabling sustained delivery of high quality product at low cost from our existing mining hubs over the longer term. We have already significantly cut the cost of production at WAIO and plan to go further.” BHP’s share price rallied by 1.64 per cent following the announcement yesterday.