BHP Billiton cuts iron ore forecasts
BHP will produce 10m tonnes less iron ore this financial year, in a move set to further bolster ore prices.
BHP Billiton has cut full-year iron ore guidance by 10 million tonnes after a severe Pilbara region wet season, in a move expected to further bolster iron ore prices following Rio Tinto’s 2017 guidance cut announced yesterday.
In its third quarter report, BHP said bad weather and the start of a rail maintenance program had cut 2015-16 West Australian production guidance (including minority partners’ share) from 270 million tonnes to 260 million tonnes — a cut of 4 per cent.
“WA iron ore production for the nine months ended March 2016 increased by two per cent to a record 193 Mt (100 per cent basis) and reflected the Jimblebar mining hub operating at full capacity and improved ore handling plant utilisation at Newman,” BHP said. “This was partially offset by one-off operational issues in the December 2015 quarter, along with the impact of adverse weather conditions and the initiation of an accelerated rail network maintenance program in the March 2016 quarter.”
BHP said that, despite the cut, its unit cost guidance of $US15 a tonne, before freight and royalties, remained intact.
Quarterly West Australian iron ore production of 61.5 million tonnes was in line with UBS expectations.
Even to meet the reduced guidance, BHP will need a record-equalling fourth quarter production of 67 million tonnes.
The news follows on the heels of Rio Tinto’s decision this week to slash its 2017 production target by up to 20 million tonnes owing to issues with its driverless train program.
That development helped the iron ore price surge past $US60 a tonne overnight, with the latest BHP update offering the potential to further inflate the commodity’s price today.
The commodity ended the latest session up 3.2 per cent at $US61.80 a tonne.
BHP chief Andrew Mackenzie said productivity at the company continued to improve.
“Over the last 12 months, we have taken a number of steps to strengthen BHP Billiton, including asset sales and the defererral of investment for long-term value,” he said.
“While these measures will reduce our output this year, they have increased our focus on our highest-quality operations and will support stronger margins and returns.”
Total third-quarter petroleum production of 59.4 million barrels of oil equivalent beat UBS expectations of 55.9 million barrels and let BHP leave full-year guidance of 237 million barrels of oil equivalent in place.
The company said it would boost its full-year offshore oil and gas exploration budget by $US40m to $US640m, confirming reports in The Australian last year that it was boosting its exploration program to take advantage of low exploration rig hire rates.
Copper production of 405,000 tonnes beat expectations of about 380 million tonnes. Full year copper production guidance of 1.5 million tonnes was not changed.
BHP’s share price has been surging over the past fortnight in line with a recovery in commodity prices, with its ASX-listed stock up 23 per cent since April 5. Its shares are now 10.1 per cent higher in the year-to-date.
