BHP Billiton To Cut Unit Costs At Western Australia Iron Ore By 25%

(RTTNews) - Mining giant BHP Billiton Ltd. (BHP, BHP.AX, BBL, BLT.L) announced Sunday plans to cut unit costs at Western Australia Iron Ore or WAIO by at least 25 percent in a move which will make it the iron ore producer with the lowest cost in Australia.

BHP expects to reduce unit cash costs by 25 percent to less than $20 per tonne in the medium term to be achieved in the 2014 financial year.

BHP, the world's biggest miner, is also set to boost capacity at WAIO by 65 million tonnes per year or by 30 percent, at a very low capital cost in order to meet the increasing demand from China and extract a bigger chunk of orders at competitive prices.

BHP noted that it is looking to add 65 million tonnes of capacity at WAIO at a capital intensity of about $30 per annual tonne, taking total system capacity to 290 Mtpa from 225 Mtpa by the end of the 2017 financial year.

BHP currently expects to increase the WAIO mine capacity to 275 Mtpa without the need for additional fixed plant investment. Further, the Inner Harbour Debottlenecking and Jimblebar Phase 2 projects will help it to reach 290 Mtpa of supply chain capacity at low capital cost.

BHP's Anglo-Australian rival Rio Tinto plc (RTNTF, RIO, RIO.L, RTPPF) is currently the world's lowest-cost iron-ore mining company. The latest move by BHP will enable it to be the lowest cost iron ore miner to China on an all-in cash basis.

"We continue to see healthy demand growth for iron ore in the mid-term as Chinese steel production is expected to increase by approximately 25 per cent to between 1.0 and 1.1 billion tonnes in the early to mid-2020s," BHP Billiton President Iron Ore, Jimmy Wilson, said in a statement.

Wilson added that global steel production is expected to see a compound annual growth rate of between 2.5 and 3.0 percent through to 2030.

In order to meet the demand of steel making company's, BHP has been for the past two years focusing on productivity instead of major supply chain investment, cost reduction and capital efficient growth.

"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," Wilson added.

BHP closed Friday's regular trading session on the NYSE at $57.23, down $1.55 or 2.64% on a volume of 4.97 million shares.