The company is now targeting $US4 billion ($A4.6 billion) in annualised productivity gains by the end of the 2017 financial year, an increase of $500 million on previous guidance.

The gains will come through BHP’s core assets, with non-core assets to be demerged next year.

“The group’s core assets generated more than 96% of its operating profit in the 2014 financial year, so we can cut complexity and lower costs without losing the benefits of scale and diversity,” BHP CEO Andrew Mackenzie told an investor briefing in Sydney this morning.

"Put simply, we can organise a company that operates 12 large, core assets differently to one with 30 operated assets of varying sizes across a broader range of commodities.

“We can bring senior management closer to the operations, reduce duplication and cut functional costs to maximise shareholder value.”

The company is targeting a minimum $2.6 billion reduction in cash costs per annum.

BHP said improved productivity would allow planned investment to be lowered by $600 million to $14.2 billion in FY15 and to $13 billion in FY16 without impacting production.

Mackenzie said improved capital productivity would give the company additional flexibility.

“We are reducing the cost of bringing on new production and can lower our investment without slowing volume growth,” he said.

“Our commitment to a solid ‘A’ credit rating and a progressive dividend policy has underpinned sector-leading shareholder returns.

“From this strong foundation we will strike the right balance between investment in high return opportunities and returning cash to shareholders.”

After discussing iron ore and petroleum in London last month, the company also provided an update on the coal and copper businesses, outlining debottlenecking projects in copper and cost reductions in coal.

Mackenzie also touched on the Nickel West business after mothballing plans to sell it earlier this month.

“We can do a lot more – not just with Nickel West – but with all our assets, to maximise value,” he said.

But he said there would be no investment or exploration within the division, with the company to just run it for cash.

“Clearly, there’s a limited life to that,” Mackenzie acknowledged.

“But we’re open to any creative ideas that other parties may bring, but that didn’t come the first time around.”

BHP shares were last trading more than 3.8% higher at $A32.92.