BHP Billiton Lifts Productivity Target

BHP Billiton is upping the stakes in its efforts to grow production while cutting costs, lifting its target for annual productivity gains to $US4 billion ($A4.33 billion) a year.

The mining giant has announced it is lifting its productivity target by $US500 million and now expects to achieve annualised gains of $US4 billion by the end of the 2017 financial year.

Chief executive Andrew Mackenzie says a planned demerger that will spin off some of BHP’s poorer-performing assets will help drive the productivity gains.

Mr Mackenzie says the demerger will allow the company to better organise its operations.

“We can bring senior management closer to the operations, reduce duplication and cut functional costs to maximise shareholder value,” he said on Monday.

Mr Mackenzie said the productivity gains would deliver a “step change” improvement in BHP’s performance that would allow it to bring on new production at lower costs without hurting volume growth.

The $US4 billion productivity gains are expected to include a reduction in cash-costs of $US2.6 billion a year.

Meanwhile, the company plans to cut capital expenditure and exploration costs from $US14.8 billion to $14.2 billion this financial year and to $US13 billion in 2015/16.

Under the demerger plans, BHP will spin off its aluminium, manganese, nickel and silver operations as well as some coal assets into a new entity dubbed NewCo.

That will allow BHP to focus on its “core pillars” of iron ore, coal, copper and petroleum.

BHP Billiton expects to release full details of the proposed demerger in March and is planning a shareholder vote on the move in May.


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