BHP Billiton cuts spending by 25%
BHP Billiton (ASX, NYSE: BHP) (LON: BLT), the world's largest miner, plans to cut spending by 25%, down to $15 billion, and focus on its core businesses while commodity prices continue to be weak.
As part of chief Andrew Mackenzie’s presentation at the company’s petroleum investor briefing in Houston, US, BHP said the goal represents a deep cut in the almost $22 billion it spent on projects last financial year. These endeavours included a new operation to mine the vast iron ore deposits in Australia's Pilbara region and the exploration of deep-sea oil and natural gas fields in the US. Gulf of Mexico.
Mackenzie highlighted BHP has remained profitable thanks to a severe cost-cutting program implemented earlier in the year and added the mining giant was on track to meet production guidance and deliver 16% growth in the next two years.
"By generating more volume from our existing equipment and lowering unit costs, we will continue to build on the $2.7 billion reduction in controllable cash costs delivered in the 2013 financial year," Mackenzie said in a statement.
The executive, who took over in May, also noted the company will base future decisions on its "four key pillars": coal, iron ore, petroleum and copper. This doesn’t necessarily mean the company is abandoning its other units. In fact, BHP separately announced Tuesday that it will invest $4bn a year to step up output from its US shale reserves,and expects the business to generate $3bn of cash annually by 2020.
BHP is just one of the top miners that have recently decided to slash their capital expenditure budget. Last month rival Rio Tinto (ASX, LON, NYSE:RIO) announced it was planning to will spend $3 billion less than previously said, aiming to halve capital expenditure this year.