BHP Billiton significantly stepped up production of both iron ore and metallurgical coal in its first operating quarter ending 30 September. But it is the company’s medium term targets for its iron ore operations which will strike more fear into the hearts of the vast majority of ferrous mining companies outside of the big three/four producers.

Iron ore production increased by 17% in the September 2014 quarter to a record 57 million tonnes. Total iron ore production is forecast to increase by 11% in the 2015 financial year to 225mt, consistent with prior guidance, the company says.

Meanwhile metallurgical coal output increased by 25% in the September 2014 quarter to a record 13mt. Total metallurgical coal production is forecast to increase by 4% in the 2015 financial year to 47mt, again consistent with prior guidance, BHP confirms.

BHP’s “relentless focus on productivity continues to yield strong results” says ceo Andrew Mackenzie. The company’s focus going forward, with no major projects in execution, is to maximise the value of existing infrastructure, to reduce costs and invest judiciously in very low capital cost debottlenecking initiatives, the ceo adds.

“These plans are expected to increase total iron ore supply chain capacity to 290 million tonnes/year by the end of the 2017 financial year and reduce unit costs by at least 25% to less than US$20/tonne”, Mackenzie confirms.

The capacity figure is subject to board approval, unit costs are excluding freight and royalties and the unit cost value is based on real 2014 terms which are AU$:US$ of 0.91, Kallanish notes.

Earlier this month iron ore mining newcomer Northland Resources halted production in Sweden because of lack of liquidity (see Kallanish 8 October). With iron ore at $80/tonne, Northland’s cash costs were $63/dry metric tonne. This may well be a top-end C1 cost for the sector but the potential effect of BHP’S targets for smaller non-captive iron ore miners in both the short and medium term is now very clear, Kallanish observes.