BHP Billiton has joined its big rival Rio Tinto in trimming its West Australian iron ore production guidance.
Rio’s cut was to its 2017 target and was due to delays in implementing its AutoHaul automated train system. BHP’s cut is because of bad weather and the Samarco disaster in Brazil.
In its March quarter production and sales update released yesterday, BHP said it produced 53.057 million tonnes of iron ore at its Western Australia iron ore (WAIO) operations in the three months to March 31, down 10% compared to a year ago owing to “adverse weather conditions” in the first three months of 2016 as well as the start of an accelerated rail network program.
Fortescue Metals Group is the only one of our big three iron ore exporters not to feel the impact of bad weather in the March quarter, even though it ships through the same port as BHP – Port Hedland.
BHP said its volumes in Western Australia were offset by the suspension of operations at Samarco in Brazil in which it is a 50% joint venture partner with Vale, the giant Brazilian miner.
The partners are currently engaged in cleaning up the damage caused by the tailings dam burst and widespread environmental damage. The final cost is not known for the two groups, but it will be in the billions of dollars, including government imposed fines and penalties.
BHP cut its full-year guidance at its WAIO operations by 10 million tonnes to approximately 260 million tonnes (including tonnage of its various partners), but it left forecasts for its petroleum, copper and coal divisions unchanged.
The Samarco disaster saw BHP trim its guidance in January, and the latest cut means the 2016 target will be down 18 million tonnes (or more than $US100 million in revenues at current prices ).
Yesterday, Rio Tinto cut its iron ore forecasts for 2017 by between 10 and 20 million tonnes (from this year’s 350 million tonnes), but is sticking with its guidance for this year.
Spot iron ore prices rose by 23.4% during the first quarter, and have since climbed a further 16.9% to $US62.85 a tonne on Tuesday. It rose 3.1% to a 10 month high of $US64.77 on Wednesday.
BHP shares hit a five month high at $19.67 on Tuesday, and they rose by another 71 cents, or more than 3% yesterday to close at a new multi-month high of $20.34.
