BHP tightens belt, targets $1.6bn in cost-cutting at Australian operations

Miner says copper to drive most its future growth

World’s No.1 miner BHP (ASX, NYSE:BHP) (LON:BTL) is tightening its belt, especially when it comes to its operations in Australia, targeting as much as $1.6 billion in productivity gains at its iron ore, copper and coal units in the country over the next two years.

While the company has already had reduced costs across its Australian businesses over the past five years, it’s now hoping to lower unit costs by further 10% in the medium term, BHP Minerals Australia president Mike Henry said Tuesday.

At the same time, BHP plans to lift its Australian iron ore production "run rate" to 290 million tonnes a year by the end of fiscal 2019, Henry said during a briefing in Adelaide. This, as the mining giant sees prices for iron ore and metallurgical coal rebounding sharply in two months, as buyers look to replenish stocks.

Once again BHP showed one of its favourite commodities in which to base future growth is copper, mostly due to the expected uptake of electric vehicles and renewable energy.

The company also pointed to a shortage of the red metal emerging by the early 2020s and says $100 billion in new mine spending is needed to meet demand over the next 15 years.

For now, BHP is pushing ahead with a study into a $2.1 billion expansion of its Olympic Dam copper, gold and uranium mine in South Australia.

The company already is in the midst of its biggest annual investment spending at Olympic Dam, rebuilding its smelter and targeting high-grade ore deposits through the expansion of its underground mine.

It will increase copper production from 166,000 tonnes last financial year to 230,000 tonnes in 2020.

In 2020, BHP’s board is expected to make a final investment decision on a $2.1 billion expansion that would lift production to 330,000 tonnes by 2023.