The mining giant, which reported a 42 per cent drop in operating profit to $2.45bn, cut unit costs in real terms by $105m in the first half of the year, as it battled a cyclical slowdown in commodity prices.
It now expects to slash about $970m from its expenses this year, cutting $390m from unit costs.
These savings are intended to offset $580m of cost increases resulting from creaking mining infrastructure.
Chief executive Mick Davis called the savings “credible”.
He said cuts were achieved despite the proposed merger with Glencore, which posed a “potential risk of distraction”.
A deal between the two is currently up in the air after a prominent Xstrata investor, Qatar Holdings, demanded better terms.
Standard Bank’s Peter Davey called yesterday’s profits, “a surprisingly strong result”.