Suddenly, BHP Billiton (BHP) is bouncy, upbeat and looking forward as world commodity prices, led by coal, and helped by continuing solid prices for iron ore, show more signs of a rebound.
The tone in the brief comments yesterday from CEO, Andrew McKenzie in yesterday’s first quarter production report reveals a company that has shaken off the gloom of the big loss for 2015-16 and the strains caused by the Samarco dam disaster in brazil almost a year ago.
"We have seen early signs of markets rebalancing," the group’s chief executive, Andrew Mackenzie said. “Fundamentals suggest both oil and gas markets will improve over the next two to 18 months,” he added
"Iron ore and metallurgical [coking] coal prices have been stronger than expected, although we continue to expect supply to grow more quickly than demand in the near term.
“The combination of steadier markets, continued capital discipline, improved productivity and increased volumes in copper, iron ore, and metallurgical coal should further support strong free cashflow generation this financial year,” the CEO said. BHP left its full year production guidance unchanged, with September quarter oil output down 15%, copper down 6% and steaming coal off 4%.
But iron ore output was steady and coking coal production edging edged up 1%.
China’s iron ore imports climbed to 93 million tonnes in September, the second highest on record. Spot iron ore traded around $US58 a tonne yesterday, the highest in over a month.
Metallurgical (coking) coal prices have more than doubled since January to around $US230 a tonne. Thermal coal prices have risen from just under $US49 a tonne earlier this eyar to $US90 ex Newcastle, (and $US100 a tonne for one shipment reported by Reuters).
Nickel has gained 16%. Copper though has hardly moved.
BHP said it was on track to meet its fiscal 2017 production guidance for iron ore of 265 million to 275 million tonnes versus 257 million last year
Output at Olympic Dam copper/gold mine in South Australia was down largely due to planned maintenance but with production hampered briefly late in the quarter due to power outages.
Total iron ore production for the September 2016 quarter was unchanged at 58 million tonnes (Mt) on a BHP Billiton share basis, or 67 Mt on a 100%.
"Guidance for the 2017 financial year remains unchanged at between 228 and 237 Mt on a BHP Billiton share basis, or between 265 and 275 Mt on a 100 per cent basis, with volumes weighted to the last three quarters of the year,” the company said.
WAIron ore production for the September quarter was flat as the ramp-up of additional capacity at Jimblebar offset lower volumes at Yandi. "The 24 month rail renewal and maintenance program, which will support the integrated supply chain’s long-term reliability, is progressing on schedule. Completion of rail renewal works near Newman underpinned a four per cent increase in volumes from the June 2016 quarter,” BHP said.
"The installation of the new primary crusher and additional conveying capacity at Jimblebar is expected to be completed in the December 2016 quarter, with all associated spend included within WAIO’s long-term average annual sustaining capital expenditure of approximately US$4 per tonne.
"Mining and processing operations at Samarco remain suspended following the failure of the Fundão tailings dam and Santarém water dam on 5 November 2015. During the September 2016 quarter 12 kt of pellet feed was sold, with additional sales expected in the December 2016 quarter,” BHP said.
Total petroleum production for the September 2016 quarter fell 15% to 54.5 M million barrels of oil equivalent (MMboe).”Guidance for the 2017 financial year remains unchanged at between 200 and 210 MMboe, comprising Conventional volumes between 123 and 127 MMboe and Onshore US volumes between 77 and 83 MMboe.
BHP plans to invest around $US1.4 billion in the petroleum business in 2016-17. Around $US800 million will be spent extending the life of fields in Bass Strait and the North West Shelf in WA. A further $US600 million will be spent onshore in the uS on the company’s unconventional oil and gas businesses. The company plans to spend $US700 million on exploration work in the Gulf Of Mexico and on a campaign in Trinidad and Tobago.
Total copper production for the September 2016 quarter fell 6%to 355,000 (kt, or kilo tonnes). "Guidance for the 2017 financial year remains unchanged at 1.66 Mt, subject to the review of Olympic Dam copper production guidance noted below.”
Metallurgical coal production for the September 2016 quarter increased 1%to 11 Mt. Guidance for the 2017 financial year remains unchanged at 44 Mt.
"Queensland Coal production was broadly unchanged for the September 2016 quarter. Increased wash-plant and truck utilisation across all mines offset the completion of longwall mining at Crinum in the December 2015 quarter, adverse weather conditions, the planned longwall move at Broadmeadow and wash-plant shutdown at Saraji, and lower yield at South Walker Creek,” BHP said.
Energy coal production for the September 2016 quarter fell 4% to 7 Mt. Guidance for the 2017 financial year remains unchanged at 30 Mt.
