The Business

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A tale of two miners, but both set to slash billions in costs and capital.

Updated November 29, 2012 22:20:52

Australia's major mining companies have declared war on costs. Both BHP Billiton and Rio Tinto fronted investors today outlining their focus on rising charges.

Source: The Business | Duration: 3min 22sec

Topics: business-economics-and-finance, australia


TICKY FULLERTON, PRESENTER: Australia's major mining companies have declared war on costs.


Rio Tinto is targeting savings of $5 billion over two years amid cautious optimism about the future.

Here's finance correspondent Phillip Lasker.

PHILLIP LASKER, REPORTER: It wasn't just shareholders having their say at BHP Billiton's annual general meeting. The daring protests led to arrests and frayed tempers.

MAN: This protecting society for you, Luis? I played soccer with you, man. Shame on you, what you're doing.

PHILLIP LASKER: And it continued inside, with some shareholders calling for higher dividends. But essentially, BHP wasn't about to hand more money to investors in an uncertain world.

JAC NASSER, CHAIRMAN, BHP BILLITON: While there are some signs that the global economy is stabilising, uncertainty and high government debt continue to be the most pressing challenge.

PHILLIP LASKER: BHP says China will remain the driver of growth and a key focus will be cost cutting.

MARIUS KLOPPERS, CEO, BHP BILLITON: The reality is that we cannot do all of that heavy lifting on our own. The cost environment in which we operate is heavily influenced by government regulations and policies around the world. It's important for governments, as I said before, to provide stable, predictable policy regimes.

PHILLIP LASKER: The Federal Government is considering tinkering with the mining tax to prevent underwriting royalties charged by the states. But the BHP boss suggested his company wouldn't be paying the mining tax amid weaker commodity prices and a strong dollar.

MARIUS KLOPPERS: Those two factors would mitigate against higher profits at this stage.

JOURNALIST: So you think it's unlikely you'll be paying any of the tax?

MARIUS KLOPPERS: I'm not going to be drawn on speculation, I'm so sorry.

PHILLIP LASKER: The speculation was all about Marius Kloppers' future and succession plans, a major talking point, which chairman Jac Nasser tried to head off at the AGM.

JAC NASSER: We would not be doing our job as a board if we weren't looking at this every day. We look at it continuously. We look at it from the first day a CEO is appointed.

PHILLIP LASKER: Rio Tinto executives were also out and about briefing investors on their latest assessment of the future.

TOM ALBANESE, CEO, RIO TINTO: I'm cautiously optimistic about the fact we're beginning to see green shoots in China. We're beginning to see signs that there is some albeit slow levels of stimulus that's beginning to have some positive effect on the market albeit it's probably slower than we would have thought six months ago.

PHILLIP LASKER: So the miner has plans to cut a massive $5 billion in costs by the end of 2014, looking hard at operations where costs are rising.

TOM ALBANESE: We'll certainly be keeping an eye on which businesses have had higher levels of escalation than others and certainly which businesses are more challenged. But right now our two most challenged businesses are aluminium and coal, particularly Australian coal. So those, you would expect, have higher targets on a percentage wise basis than the other product groups.

PHILLIP LASKER: And the inevitable job losses are likely to follow.

TOM ALBANESE: Any business that's been in ups and down of cycles recognises that difficult decisions need to be made.

PHILLIP LASKER: But Rio will boost its production of iron ore, copper and alumina.