BHP Plans to Cut Coal Costs Further, Signals Positive Outlook

   By Rhiannon Hoyle 
 

SYDNEY--BHP Billiton Ltd. (BHP.AU) outlined plans to cut costs further in its coal business, although it was optimistic about future demand for the commodity and said all of its mines are generating positive cash flow despite a prolonged market downturn.

The miner said it aims to reduce coal-output costs by 17% in the year through June 2017 compared to two years earlier, and it expects a productivity drive to reduce spending by US$600 million by mid-2017, on top of the US$3 billion of savings recorded since 2012.

BHP slashed costs in its coal business, including cutting jobs and suspending unprofitable mines, as prices of the commodity tumbled to multiyear lows because of a global oversupply.

"Even in today's difficult environment, all of our operations remain cash positive," said Mike Henry, BHP's head of Australian mining operations.

On Tuesday, BHP signaled a positive outlook for both coking coal, used in steelmaking, and thermal coal, used to generate electricity.

"The developing world needs steel, steel needs coking coal," said Mr. Henry. "Against the backdrop of greater uncertainty in the outlook for thermal coal, we are confident that base demand in emerging economies will remain resilient for decades to come and our higher quality coals position us well in an increasingly carbon constrained world."

BHP forecast absolute demand for thermal coal to increase by 10-15% by the mid-2020s.

Write to Rhiannon Hoyle at [e-mail]

(END) Dow Jones Newswires

June 20, 2016 19:22 ET (23:22 GMT)

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