BHP Now Plans Deeper Cost Cutting Based On The Demerger Plans

Worsley Alumina. Image: BHP Billiton.

BHP has decided to cut costs deeper than foresahdowed on the back of savings expected by the proposed demerger.

The giant miner now plans to save US$4 billion of annualised productivity by the end of the 2017, an increase of $500 million.

CEO Andrew Mackenzie told an analysts meeting the demerger of the company will create an organisation which supports better productivity.

“We can bring senior management closer to the operations, reduce duplication and cut functional costs to maximise shareholder value,” Mr Mackenzie said.

“By focusing on the productivity of our largest businesses, we can deliver a step-change
improvement in performance.”

Shareholders are expected to vote on the $15 billion demerger in May.

Following the demerger, BHP will focus on iron ore, copper, petroleum, coal (mainly metallurgical coal in Queensland and thermal coal in New South Wales) and potash.

The smaller new company, headquartered in Perth, would hold the aluminium and manganese businesses, nickel in Cerro Matoso, energy coal in South Africa, metallurgical coal in Illawarra and silver-lead-zinc mines in Cannington.

Approvals for the demerger have already been secured from the Foreign Investment Review Board and the Australian Taxation Office.

Mackenzie also announced a number of appointments to the management team of the new company it plans to create from the demerger.

Ricus Grimbeek has been appointed President and Chief Operating Officer Elect Australia and will be based in Perth.

Mike Fraser has been appointed President and Chief Operating Officer Elect Africa and will be based in the new company’s regional Johannesburg office.

Ricus Grimbeek will join the new company from Worsley, where he has been Asset President since November 2011.

Mike Fraser is currently a member of the BHP Billiton Group Management Committee and President, Human Resources.

BHP shares were up more than 4% to $32.98.

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