Dec 11 (Reuters) – It’s taken some time but there are signs that the cost-cutting efforts by major commodity producers such as BHP Billiton and Rio Tinto are starting to convince investors.
“My principle aim is to create value and free cash flow,” Andrew Mackenzie, the chief executive of BHP , said at an investor briefing on Dec. 10.
To this end he confirmed that capital expenditure at the world’s largest mining company has been too high in recent years, with the $23.3 billion spent last year poised to shrink by 25 percent in the 2013 fiscal year, and again in subsequent years. The presentation slides anticipate capital expenditure for major projects being a quarter of the 2013 level by 2016.
Rio Tinto , the world’s second-biggest miner, is also slashing spending, announcing plans to halve capital expenditure and slash debt.
Rio Tinto said on Dec. 3 that it will cut spending to $11 billion in 2014 from just under $14 billion this year, and sees capital spending at $8 billion in 2015, which would be less than half what it was in 2012.