The largest mining company by market value in the world – BHP Billiton Plc shared its intentions to intensify its cost-cutting and productivity strategies to help maintain its dividends at a time of falling iron ore and crude oil prices.
The decision comes at a moment when the companys executives look to free up cash for shareholder returns as well as for projects related to BHPs future expansion. A large number of global mining companies have become more focused on cutting their expenses and capital expenditures over the past two years because larger returns have been sought by their investors.
Chief Executive Officer Mr. Andrew Mackenzie said for the Financial Times: “Improved capital productivity gives us additional flexibility. We are reducing the cost of bringing on new production and can lower our investment without slowing volume growth.”
The U.K.-based company revealed that it is to reduce more expenses and make the investment spending cuts faster than initially planned. BHP shared its projections for annual productivity-led gains estimated to $4 billion by the middle of 2017. This forecast is $500 million higher than the previous one.
BHP considers that its targets could be met by reducing its costs by $2.6 billion in cash and reducing its already existing operations by larger volumes. The U.K.-based company revealed that its capital outlays will be cut to $13 billion over the financial 2016. This represents a 40% decline in comparison to the figures reported in 2012.
“We are able to drive productivity both in capital and in our operations at a pace that we can more than counteract the impact of price and ensure that our dividend is covered,” said Mr. Mackenzie, cited by Bloomberg.
BHP plans to reduce its projects and exploration expenditures to $14.2 billion over the 12 months ending in June. In comparison, the companys previous estimate amounted to $14.8 billion. According to BHPs annual report, a total of $22.7 billion were allocated in the fiscal 2012.
The company has also been planning to seek a stable increase, or at least keep its dividend of $1.21 per share.
BHP Billiton Plc lost 1.62% to trade at GBX1 635.00 per share by 8:50 GMT in London, marking a one year change of -12.85%. The company is valued at GBP91.14 billion.
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