BHP targets costs again

BHP Billiton is aiming to shave another 10 per cent off the cost of production at its Australian mines as it targets new savings and productivity gains of $2.1 billion.

The mining titan has also pointed to a copper shortage emerging by the early 2020s and says $US100 billion ($130.6 billion) in new mine spending is needed to meet demand for the red metal over the next 15 years.

BHP’s growing bullishness on the outlook for copper – driven by the uptake of electric vehicles and renewable energy – comes as it pushes ahead with a study into a $US2.1 billion expansion of its Olympic Dam copper, gold and uranium mine in South Australia.

The miner is already in the middle of its single biggest annual investment spending at Olympic Dam, rebuilding its smelter and targeting highgrade 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. The miner’s board is poised to make a final investment decision on a $US2.1 billion expansion in 2020 to lift production to 330,000 tonnes by 2023. The expansion would shift Olympic Dam’s production cost from among the top 25 per cent of copper mines globally to the bottom 25 per cent.

BHP Olympic Dam asset president Jacqui McGill said she was confident the economics of the project meant it would win out over others vying for capital in the miner’s global investment portfolio.

“The project is still in study phase but its appealing economics mean it will likely stand up very well in the (company’s) capital allocation framework,” Ms McGill said.

Olympic Dam could ultimately be expanded to produce 450,000 to 500,000 tonnes a year, BHP said.

Speaking at an investor briefing yesterday, BHP Minerals Australia president Mike Henry said the world’s biggest mining company was aiming to achieve new productivity gains worth $US1.6 billion ($2.1 billion) in the next two years.

It will come as the miner makes better use of driverless trucks and other autonomous technology.

The group is also using “big data “to make its mine maintenance program more effective, allowing its mining equipment to last longer and be serviced quicker.

BHP was also looking to lower the cost of production at its iron ore, coal and copper mines by another 10 per cent over the medium term, Mr Henry said.

“By sharing knowledge and replicating best practice across our global portfolio, we’ve been able to substantially reduce unit costs at our Australian mining operations over the last five years,” he said.

Mr Henry said the ongoing productivity drive would likely result in some job losses but there would be “no sea change” in numbers across its core operations.

BHP has more than halved the cost of producing iron ore over the past five years to $US14.60 a tonne and will look to drive that below $US13.

BHP shares fell 2 per cent yesterday to $27.38.