LONDON--Mining titan BHP Billiton Ltd. (BHP) on Monday unveiled
further details about how it plans to meet its cost-reduction and
productivity improvement targets and said it is looking to divest
its Fayetteville shale acreage in the U.S.
The Anglo-Australian miner, the world's largest by market
capitalization, is in the process of spinning off part of its
business, leaving it with a higher quality core of 19 assets. This
core portfolio of assets is expected to grow output by 23% in
copper equivalent terms over the two years to the end of the
financial year ending June 30, 2015.
This compares with the company's previous guidance that it would
grow output by 16% over the same period, including output from the
assets that will now be spun-off.
"As our capital efficiency improves we will be able to create
more value for less investment. We believe we can significantly
reduce annual capital expenditure relative to our current plans
while maintaining our growth trajectory," said Andew Mackenzie,
BHP's chief executive, in a statement related to the company's
investor day briefing.
BHP expects a minimum $3.5 billion in annualized productivity
gains by the end of the 2017 financial year with more than $2.3
billion to come from cash cost savings. This should help the
company generate an ungeared, post tax, nominal rate of return of
over 20% based only on its core portfolio of assets, Mr. Mackenzie
said.
At its Western Australian iron ore business, BHP expects to
deliver a further 25% reduction in unit costs in the medium term.
At its majority-owned Escondida mine in Chile, BHP plans to reduce
unit costs by another 5% in the 2015 financial year. And at its
U.S. onshore petroleum operations, unit costs are expected to
decline by 10% in the 2015 financial year. The company also plans
to reduce its Queensland coal unit costs in Australia by 10% to
below $90/ton in the 2015 financial year.
Mr. Mackenzie also said the company is planning to divest its
Fayetteville acreage as it has decided to fully concentrate on the
development of its high quality Haynseville gas field. He said,
however,"we will only divest the field if it maximises value for
shareholders."
-Write to Alex MacDonald at alex.macdonald@wsj.com
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