BHP Billiton outlines plans to trim costs and increase production at its WAIO unit

2476
Image credit: flikr user: Chris Walters

BHP Billiton has unveiled plans to cut costs in its Western Australian Iron Ore (WAIO) division by at least 25% and to increase the unit’s capacity by 65 million tonnes per year in an effort to reassure analysts and investors – who will be touring the company’s Pilbara assets next week – that it can withstand the downturn in iron ore prices.

Image credit: flikr user: Chris Walters
Image credit: flikr user: Chris Walters

BHP’s Iron Ore President Jimmy Wilson said the target was to expand exports to 290 million tonnes per year in 2017 from the current 225 million tonnes and produce iron ore for less than $23 per tonne, which would rank the company above Rio Tinto as Australia’s lowest-cost producer.

“In anticipation of this transition, we turned our focus from major supply chain investment to productivity, cost reduction and capital efficient growth more than two years ago. We expect unit cash costs of less than US$20 per tonne in the medium term, a reduction of more than 25% on the average achieved in the 2014 financial year,” Mr Wilson said in a media release.

“The economics of further increasing our production are compelling. 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. We now expect to increase WAIO mine capacity to 275 Mtpa without the need for additional fixed plant investment. Beyond that, the Inner Harbour Debottlenecking and Jimblebar Phase 2 projects will help us to reach 290 Mtpa of supply chain capacity at low capital cost.”

Mr Wilson highlighted the quality and footprint of the WAIO operations which consist of the four main joint ventures Mt Newman, Yandi, Mt Goldsworthy and Jimblebar.

Adertisement

“We have the strongest resource position in Western Australia and the quality of our ore bodies will help us sustain strong margins over the long term. We have already significantly cut the cost of production at WAIO and plan to go further,” he said.

Meanwhile, rival Rio Tinto is moving forward with its own development plans as it sought federal approvals for a new expansion in the Pilbara, which would increase the company’s production and export rate from 290 million tonnes per year to 330 tonnes a year by 2015.