BHP Iron Ore Output Rises 15% to Beat Analyst Estimate

BHP Billiton Ltd.’s fourth-quarter iron ore production gained 15 percent as the world’s largest mining company expands operations in Australia’s Pilbara region, setting a 12th consecutive annual record.

Output was 40.9 million metric tons in the three months ended June 30, from 35.5 million tons a year earlier, Melbourne-based BHP said today in a statement. That beat the 37.3 million ton median estimate of five analysts surveyed by Bloomberg.

BHP, which is planning to more than double iron-ore production capacity, said today it set full-year output records across 10 operations amid a “challenging environment.” Smaller rival Fortescue Metals Group Ltd. yesterday reported record iron ore production and said it expected a gradual rebound in China’s economy, the biggest importer of the steelmaking material.

“Operationally in iron ore it’s a good result,” said Shaun Manuell, chief investment officer of Equity Trustees Ltd., which manages A$2.4 billion ($2.5 billion), including BHP shares. “Despite all this noise and concern about China, we still haven’t seen a dramatic collapse in the iron ore prices that people were forecasting.”

BHP shares fell 2 percent to A$30.18 at the close of trading in Sydney, after declining 0.7 percent yesterday in London. They’ve dropped 11 percent this year. Rio Tinto Group, the world’s third-largest miner, fell 3.1 percent after yesterday reporting iron ore output in line with expectations and warning of deteriorating global economic conditions.

Debt Crisis

Chief Executive Officer Marius Kloppers said last month the European debt crisis and spreading global economic uncertainty will affect demand for commodities in the short-term. The International Monetary Fund this week cut its 2013 world economic growth forecast to 3.9 percent from 4.1 percent estimated in April as Europe’s debt crisis slows expansion.

BHP’s oil and gas production, its second-biggest earning unit after iron ore, rose 30 percent in the quarter to the equivalent of 56.4 million barrels of oil, helped by U.S. shale liquids output. This missed the 57.6 million barrel median of four analyst estimates.

“Petroleum production numbers were soft,” Peter Esho, chief market analyst at City Index Ltd. in Sydney, said by phone. “The reason BHP has been such a massive underperformer hasn’t really been doubts about iron ore, it’s been very much doubts around the exposure to petroleum and the amount of money they’ve gone and invested in that division.”

Shale Spend

BHP entered U.S. shale gas last year, buying Petrohawk Energy Corp. for $15.1 billion, including debt, and purchasing assets from Chesapeake Energy Corp. for $4.75 billion. BHP increased production of higher-priced liquids after a plunge in natural gas prices to a decade low.

The company spent $1.4 billion during the last year on petroleum exploration, including $400 million in its onshore U.S. business, BHP said in a separate statement.

Full-year profit at BHP, slated to report earnings next month, may drop to $17.9 billion from $23.6 billion last year, according to the average of 20 analyst estimates compiled by Bloomberg. Credit Suisse AG analysts, revising down commodity price forecasts, cut their full-year profit estimate for BHP by 7 percent, according to a July 12 note.

Output of coking coal, BHP’s fourth-largest source of revenue, rose 2 percent to 8.1 million tons even as industrial action and wet weather constrained production at mines in Australia’s Queensland state. BHP lifted force majeure -- a clause that allows producers to miss deliveries because of events beyond their control -- at all of its Queensland mine sites this month after agreeing an initial accord with the unions to end strikes.

Energy coal output rose 1 percent to 18.5 million tons, BHP said. Copper gained 15 percent to 312,500 tons.

Production from BHP’s iron-ore mines in Australia’s Pilbara region will rise about 5 percent from fiscal 2012, the company said.