BHP Billiton Limited considers additional cost cuts to fight iron-ore selloff

BHP Billiton Limited considers additional cost cuts to fight iron-ore selloff

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BHP Billiton Limited (ADR) (NYSE:BHP) announced on Tuesday that it would further lower the iron ore production cost and cut operating expenses to better fight a slump in commodity rates that put pressure on industry giants as well.

The largest mining company, BHP, and its rival Rio Tinto plc (ADR) (NYSE:RIO) are battling each other in lowering the prices of iron ores. Meanwhile both companies are raising the Steel productivity, in the hope to grab more market share by constricting competitor’s market share.

BHP put an end to this criticism that such strategy was meant to compete with rivals.

Saving money has been an important subject in mining industry since the falling of metal prices in 2011 following the end of commodity super cycle.

The giant iron ore producer declared that it would cut down exploration expenses and properties to $9 billion in the fiscal 2016 year, compared to $12.6 billion in the fiscal 2015.

According to firm, it also expected to slash iron ore unit prices at its Western Australia operations by 21 percent to $16 per tonne in the 2016 financial year, slightly down from $20 per tonne last month.

Rival Rio Tinto charges $19.50 a tonne for iron ore unit in 2014, and expects the cost to lower about $17 a tonne in the current year.

Rio will still expect to outperform BHP in iron ore cost race in the financial 2016, as its cost will hopefully fall to $13-14 a tonne, according to Analyst Paul Young at Deutsche Bank in Sydney.

The weaker oil prices and U.S dollar’s strength over Australian dollar contributed to lowering of iron ore production costs of both producers.

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I cover technology, utilities and biotechnology for Markets Morning, and I help out occasionally with other industry sectors. I've written about investment and personal finance topics for more than 20 years from a lowly copywriter to editor-in-chief, so I've done a little bit of everything. For what it's worth, I have a BA from Duke University and an MBA from Rollins College. I'm married with one daughter, and that's worth more than everything else put together.

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