Iron ore and copper production stood out in the Q1 exploration and production report from BHP Billiton (BHP) yesterday, along with news of more cost cutting in its petroleum division.
BHP shareholders have been told to expect lower production in most BHP product groups this year, but the first quarter performance in copper and petroleum suggests that upgrades to the company’s low guidance for 2015-16 are possible.
BHP said it lifted iron ore production 7% in the September quarter from the same quarter in 2014-15 and remains on track to meet full-year 2016 guidance across the business.
The company said iron ore production hit a record 61 million tonnes (Mt) in the three months to September 30, up 2% on the previous quarter (and 7% on a year earlier), thanks to the ramp-up of the Jimblebar mine in Western Australia’s Pilbara.
Total iron ore sales of 67 million tonnes were above market forecasts of just under 65 million tonnes. Its share of the 67 million tonnes was 61.3 million.
The company said that improved port facilities in the Pilbara and a rise in direct-to-ship ore helped boost sales volume to a record 67 million tonnes.
BHP again forecast iron ore production of 247 million tonnes in the 2015-16 financial year.
“BHP Billiton remains on track to meet full-year production and cost guidance after a solid operational performance this quarter,” chief executive Andrew Mackenzie said in a statement with the group production report.
Ifi BHP achieves its 2015-16 forecast BHP will remain the world number three iron ore producer.
That would be behind Brazil’s Vale and Rio Tinto. Rio Tinto lifted its quarterly sales to 91.3 million tonnes from Australia and Canada. Of that Australian sales rose 16% to 85.5 million tonnes.
BHP, like its rivals, is working its mines harder to drive down costs and improve efficiencies as demand for its ore softens in the key China market.
BHP 1Y – BHP posts record quarterly iron ore production
In copper, BHP said production eased 3% year-on-year to 377,000 tonnes as lower grades of the metal mined at Escondida in Chile offset improvements in operating performance across the unit.
Production at Escondida, which BHP owns in partnership with Rio Tinto and other partners, fell 14% to 230,000 tonnes. BHP said record material was mined but offset by a 17% decline in grade. Guidance for Escondida was unchanged at about 940,000 tonnes for the 2015-16.
Copper output was better than the market had forecast and if sustained at that rate, BHP will top its guidance.
Total petroleum production fell 4% to 64.5 million barrels of oil equivalent (Mmboe), while guidance for the full-year was left unchanged at 237Mmboe.
Crude oil, condensate and natural gas liquids eased 1% to 30.7 Mmboe, while natural gas dropped 7% to 203 billions of cubic feet (bcf) as BHP put off developing onshore US gas sites. This will not impact production guidance, the company said.
BHP said it had cut its planned spending on petroleum by another 6% (or $US200 million) to $US2.9 billion for the full year. That figure includes $US1.4 billion to be spend onshore in the US.
And even though BHP revealed the cuts to spending in oil and gas, it did buy further prospective oil acreage in Australia and the Gulf of Mexico and remains on the hunt for more good acreage.
Metallurgical (coking) coal production was in line year-on-year and quarter-on-quarter at 10.449 million tonnes and thermal (energy) coal at 9.847 million tonnes. Guidance for both was unchanged for the full year.
Nickel production for the first-quarter dropped 12% to 22,000, which BHP said reflected a cut in third party ore delivered to its Kambalda concentrator in WA.
South32, the company spun out of BHP earlier this year with its mostly aluminium and coal assets, will release its first-quarter production numbers tomorrow.
BHP shares edged up 1% to $US24.23 after a late rally.
