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BHP Fourth-Quarter Iron Ore Output Rises 14% on Expansion

BHP Fourth-Quarter Iron Ore Output Rises 14% on Expansion
BHP Billiton Ltd.'s iron ore operations at Port Hedland in the Pilbara region of Western Australia. Source: BHP Billiton Ltd. via Bloomberg

BHP Billiton Ltd., the world’s largest mining company, said fourth-quarter iron ore output rose 14 percent, driving an 11th straight annual production record as Chinese demand pushes prices to all-time highs.

Output was 35.5 million metric tons in the three months ended June 30, compared with 31.2 million tons a year earlier, Melbourne-based BHP said today in a statement. That compares with UBS AG’s estimate of 34.5 million tons.

BHP reported annual production records across four commodities and 10 operations as prices for iron ore, coal and copper reached their highest levels. The company in March approved $7.4 billion in spending on iron ore mines in Western Australia to boost capacity to 220 million tons a year by 2014.

“BHP continues to benefit from organic growth and strong production,” Paul Galloway, a London-based analyst for Sanford C. Bernstein Ltd., wrote in a report today. “Elevated commodity prices during the fourth quarter should support BHP’s full-year financial results.”

The company rose 1.7 percent to 2,364.5 pence by the 4:30 p.m. close of London trading. It earlier climbed 1.9 percent to A$43.44 in Sydney, the biggest one-day advance since May 26.

BHP, scheduled to report full-year earnings next month, may post a 76 percent jump in net income to $22.3 billion, according to the average of 19 analyst estimates compiled by Bloomberg.

Chinese Demand

“The business continues to grow and key project investment will only see it larger in the years to come,” Peter Esho, chief market analyst at Sydney-based City Index Australia Pty, wrote in a report today. “We expect earnings to broadly meet market expectations.”

Vale SA, the largest iron-ore producer, said this month it sees no slowdown in demand from China as the country seeks to build 36 million low-income houses in the next five years. Rio Tinto Group, the second-largest mining company, last week reported a 12 percent jump in iron ore output in the quarter.

Production of petroleum, BHP’s third-biggest earner last year, rose 6 percent in the quarter to 43.2 million barrels of oil equivalent, boosted by the purchase in March of shale assets from Chesapeake Energy Corp. for $4.75 billion in cash.

BHP is set to increase its shale business with the agreed $12.1 billion takeover of U.S. shale gas producer Petrohawk Energy Corp. announced last week. This will make it the world’s seventh-largest oil and gas producer.

Wet Weather

The production report “was strong and ahead of our forecasts across nearly all divisions,” Deutsche Bank AG analysts Grant Sporre, Rob Clifford and Paul Young wrote today in a report. They raised their estimate for fiscal 2011 profit 1.3 percent to $21.8 billion, according to the report.

Output of coking coal, BHP’s fourth-largest revenue earner, slid 28 percent from the prior quarter to 7.92 million tons as it continued to be crimped following record floods in Queensland state. The mines also face the threat of further strikes this quarter after workers first held rolling stoppages last month.

“The remnant effects of wet weather that persisted for much of the 2011 financial year continued to restrict our Queensland” coal business, the company said. “We continue to expect production, sales and unit costs to be impacted, to some extent, for the remainder of the 2011 calendar year.”

Energy coal output rose 13 percent to 18.3 million tons, BHP said. Copper fell 6 percent to 272,300 tons.

China’s iron ore demand will rise 8.5 percent this year, based on a revised estimate of the country’s steel output last year, Sheffield, England-based MEPS (International) Ltd. said yesterday. Iron ore demand will climb to 1.07 billion tons from 986 million tons last year, MEPS analyst Rafael Halpin said.

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