BHP Cuts Capex and Iron Ore Production Cost, Australian Stocks Advance

Marcus Jacob
13 May, 2015
New York City

Australian market indexes traded higher and the Aussie dollar held below 80 U.S. cents. BHP Billiton said it plans to cut its capital spending to $9 billion in fiscal year 2016 from $12.6 billion in fiscal 2015 and lower its iron ore production cost to $16 a ton.

[R]5:30 PM Sydney – Australian market indexes traded higher and the Aussie dollar held below 80 U.S. cents. BHP Billiton said it plans to cut its capital spending to $9 billion in fiscal year 2016 from $12.6 billion in fiscal 2015 and lower its iron ore production cost to $16 a ton.[/R]

Australian stocks rebounded after the latest Federal Budget offered incentives for capital investments and to small business operators.

Australian dollar closed at 79.70 U.S. cents and in stock trading turnover dropped to 806 million shares worth $5.7 billion.

At close, the ASX 200 Index jumped 40.40 or 0.7% to 5,715.10 and the broader All Ordinaries Index gained 37.70 to 5,710.80.

In commodities trading, gold climbed US$10 to US$1,193 an ounce and Brent crude rose 0.57 cents to close at US$67.43 a barrel.

Australian Stock Movers

BHP Billiton Limited slid 0.09% to $32.50 after the mining company forecasted capital and exploration expenditure in the current fiscal year to decline to US$9 billion from US$12.6 billion.

The miner also plans to reduce iron ore unit costs at its Western Australia operations by 21% to $16 per ton in the current financial year from $20 a ton in April.

BHP has been on the drive to cut its production cost of the price of steel making ingredient has plunged more than 40% in one year.

Rival, Rio Tinto has targeted its production cost to fall to $17 a ton from the production cost of $19.50 in 2014. And, the company is working on a plan to lower the production cost further to $14 in the next fiscal year.

Lower oil prices and the fall in Aussie dollar has helped two largest iron miners in the world in cutting production costs.

Australian Agricultural Company Ltd gained 0.6% to $1.53 after the beef and agricultural products maker said total revenues in the year ending in March climbed 9.5% to $346.8 million from $316.8 million in a year ago period.

Net in the year swung to profit $9.6 million compared to a loss of $39.9 million and diluted earnings per share swung to 1.8 cents from diluted loss per share of 9.3 cents in the same period a year ago.

The company said at the end of fiscal year in March total debt increased to $366.5 million from $225.5 million a year ago.