BHP Billiton signals continued productivity focus with another coal review now underway

November 26, 2014

BHP Billiton is targeting a further 15 per cent reduction in unit costs for its NSW Energy Coal business by the end of the 2016 financial year as a new review to find productivity gains and savings gets underway.
 
A spokesperson has told us that a review of all functions within BHP Billiton’s Coal business has begun and is expected to be finalised by 1 February 2015. They said that the implications will be different for each function and all changes as a result of the review will be completed by the end of June 2015.

BHP-Mine-MtArthur.jpg
Pictured: Mt Arthur Coal mine in the Hunter Valley
 
Coal remains an important part of BHP Billiton’s business, accounting for 17 per cent of the company’s production by value in FY14.
 
Hundreds of jobs have already been lost at the company’s biggest NSW mine, Mt Arthur Coal in the Hunter Valley, as part of BHP Billiton’s efforts to reduce costs.
 
In a report to capital markets this week BHP Billiton has said that changes to operations are also helping to make savings. Equipment productivity through increased digging rates and an uplift in truck hours as well as improved mine planning and optimising maintenance will deliver further cost savings.
 
BHP Billiton’s Dean Dalla Valle, who until this week ran the company’s coal business, told the ABC that more job losses could be on the horizon.
 
“Unfortunately it's part of our cost reduction program, we've had to let people go. We will continue to make adjustments in our business as we need to, we'll consult with people, we’ll work with relevant people we need to, it's not our goal to run out and reduce more, but if we need to we will,” he said.
 
Dalla Valle will now head to Melbourne where he will have responsibility for marketing, health, safety and environment. It’s part of a management shakeup ahead of the demerger of some of the company’s assets, including its Illawarra Coal operations south of Sydney. Marketing boss Mike Henry will become president of the company's coal assets, which also include the Caroona Coal Project in the Gunnedah Basin.
 
Over the past decade, BHP Billiton has been progressively simplifying its portfolio through major transactions and divestments priced at a premium. BHP Billiton is aiming to further simplify its business through this proposed demerger, focusing on the four core businesses of coal, iron ore, copper and petroleum.
 
BHP Billiton’s Coal business would become 40 per cent smaller in annual production terms after the demerger with the number of operations dropping from 19 to 12. As a result of this change, the organisation will be streamlined, including a simpler management structure, aggregated functional support and move a greater proportion of high volume, routine work through shared service centres.
 
Mount Arthur Coal in the Hunter Valley is also looking to the future for more productivity with plans for a study to consider autonomous or “driverless” haulage truck options on site. No decisions have been made and the study isn’t expected to be concluded until at least June 2015.
 

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