By Rhiannon Hoyle 

SYDNEY-- BHP Billiton Ltd. will intensify its cost-cutting and productivity drive as executives look to free up cash for shareholder returns and favored expansion projects.

On Monday, the world's biggest miner by market value outlined plans to cut more costs and accelerate a reduction in investment spending, at a time when prices for the commodities it produces, including iron ore and oil, have fallen sharply.

BHP now says it should generate annual productivity-led gains of US$4 billion by mid-2017, compared with mid-2014, up $500 million from a previous estimate. The company believes it can meet this goal by stripping out $2.6 billion in cash costs and squeezing higher volumes from existing operations.

In August, the company said it generated annualized savings of $2.9 billion during the fiscal year to June 30, which included $1.9 billion in cost reductions; this was $1.1 billion above its target.

The forecast relates only to BHP's core assets, it said Monday, and doesn't include cutbacks at sites that will be spun off into a new, separately listed company next year, which will include its aluminum and manganese operations.

The Anglo-Australian miner also cut its investment budget for the year ending in June 2015 to $14.2 billion from $14.8 billion. Chief Executive Andrew Mackenzie said BHP could trim that further, to US$13 billion, for the following fiscal year "with no impact on growth."

At the Australian part of BHP's annual general meeting in Adelaide last week, Mr. Mackenzie sought to reassure investors about BHP's commitment to increasing returns even as commodity prices weaken. He said everything the company was doing was "aimed at increasing cash returns" to investors.

BHP has pledged to seek to steadily increase, or at least maintain, its dividend of $1.21 a share--a current payout ratio of 48%--following its planned demerger.

Mining companies have been cutting costs and capital expenditures over the past two years as shareholders have demanded higher returns following years of heavy investment.

On Monday, Mr. Mackenzie told investors that BHP would seek to cut the cost of running its coal operations in Australia's Queensland state by 10% in the year through June. "We have only just scratched the surface," he said.

The miner expects to cut the cost of producing iron ore in Western Australia state by 15%, excluding freight charges and royalty payments. On Tuesday, Mr. Mackenzie will travel to Perth, Western Australia's capital, for an annual appraisal of the company's iron-ore business. Iron-ore prices have fallen nearly 50% this year.

Mr. Mackenzie has made it clear he isn't interested in further major iron-ore investments and says BHP will instead look to spend more on copper and petroleum projects.

One of the projects that is expected to form a core part of the miner's strategy is the development of its existing Olympic Dam copper-and-uranium mine in southern Australia. BHP is considering an expansion there that could increase copper output to 450,000 metric tons a year in mid-2024, from about 185,000 tons during the last financial year, it said Monday.

The cost of the expansion would likely be "a lot less" than what was expected, about $30 billion, under a previous plan that was shelved, according to executive Peter Beaven.

BHP separately outlined plans for a management reshuffle. Among the changes, Daniel Malchuk, head of aluminum, manganese and nickel operations, which are expected to be spun off next year, will become president of the copper division, succeeding Mr. Beaven, who was recently named chief financial officer.

And next year, Mike Henry, president of safety, marketing and technology, will switch places with Dean Dalla Valle, president of the coal division, BHP said.

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

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