Mining giant BHP Billiton is planning to cut capital costs of iron ore production by 25% and to expand production by 65 million tonnes (Mt) a year at its Western Australia Iron Ore (WAIO) operations.
The increased production and low capital costs will allow the company to overtake rival Rio Tinto as the lowest cost producer of iron ore globally.
While Rio Tinto’s expenditure stands at $20.40 a tonne, BHP aims to produce iron ore for less than $20 a tonne, which does not include the cost of shipping and royalties.
BHP Billiton iron ore president Jimmy Wilson was quoted by The Wall Street Journal as saying: "This is not targeted at competitors in any way; at the end of the day, it is targeted at improving the margins and the value that we get from our own business."
With the price of iron ore falling by 41% this year to $78.90 a tonne, iron ore mining firms including Vale, Rio Tinto and BHP are looking to improve output rates with the aim of achieving greater profits from reduced production costs.
Wilson said in a statement: "We continue to see healthy demand growth for iron ore in the mid-term as Chinese steel production is expected to increase by approximately 25% to between 1.0 and 1.1 billion tonnes in the early to mid-2020s."
The company has four major hubs at its WAIO operations, namely Mt Newman, Yandi, Mt Goldsworthy and Jimblebar, where it plans to expand production capacities by 65Mt a year at a capital cost of $30 an annual tonne.
The increase will allow the company to raise its capacity from 225Mt in the last financial year to 290Mt a year by mid 2017.
"We completed our major supply chain investments some time ago and have since focused on using BHP Billiton’s benchmarking systems to improve the performance of our equipment by systematically tackling the bottlenecks," Wilson added.
"We now expect to increase WAIO mine capacity to 275Mt a year without the need for additional fixed plant investment.
"Beyond that, the Inner Harbour Debottlenecking and Jimblebar phase two projects will help us to reach 290Mt a year of supply chain capacity at low capital cost."
Image: A group of seven mines make up the Western Australia iron ore operations. Photo: courtesy of BHP Billiton.