BHP Billiton slashing $4bn off cost base to combat iron ore slump

MELBOURNE, Nov 24 (Reuters)

BHP Billiton stepped up its cost-cutting plans on Monday as the world's biggest miner battles a sharp slide in iron ore, coal and oil prices, and said the unloved assets it is spinning off are still making money despite the rout.

Chief Executive Andrew Mackenzie said BHP's priority was to maintain a solid A credit rating, hold or increase its dividend and invest in growth projects, ahead of returning capital to shareholders through special dividends or share buybacks.

"Given the underlying volatility we will only return excess cash once it's accumulated on the balance sheet, so that any program has a high dgree of certainty of being completed," he told an investor briefing in Sydney.

BHP expects to reap savings of at least $4 billion by June 2017, up from an earlier forecast for $3.5 billion, adding to $6.6 billion in costs culled over the past two years, Mackenzie said.

The company also trimmed its forecast for capital spending by 4 percent to $14.2 billion for the current financial year and said capital spending in the 2016 financial year would fall to $13 billion, helped by plans to spin off its aluminium, manganese and silver units into a separate company in mid-2015.

BHP disappointed investors in August when it did not announce a capital return, holding back as it saw prices of its key commodities tumbling.

The global miner was in better shape than its peers, thanks to its strategy and a strong balance sheet that is helping it weather a weak commodities market, Mackenzie said.

Its biggest business, iron ore, has suffered from a 48 percent plunge in prices this year, largely due to BHP and rivals Rio Tinto and Fortescue Metals Group flooding the market with low-cost ore.

At the same time, prices for two of its other major commodities, coal and oil, have also plunged, with coal at 5-1/2-year lows and oil near four-year lows.

To help boost its profitability, BHP is on track to spin off its smaller aluminium, manganese and silver assets and some coal and nickel assets into a separate company next year, so it can focus on its iron ore, copper, coal and petroleum businesses.

Mackenzie said despite the rout, the spin-off company's businesses were still cash positive.