BHP Raises Annual Iron Ore Estimate After Quarterly Gain

BHP Billiton Ltd., the world’s biggest mining company, raised its full-year iron ore production guidance after third-quarter output gained 23 percent to beat analyst expectations.

Production was 49.6 million metric tons in the three months ended March 31, from 40.2 million tons a year earlier, Melbourne-based BHP said today in a statement. That compares with the 48.3 million ton median estimate of four analysts surveyed by Bloomberg.

BHP reiterated today it’s studying a simplification of its portfolio of assets to focus on its more profitable operations including iron ore and copper after a decade-long boom in metal prices waned. Iron ore plunged into a bear market during the quarter as inventories rose to the highest ever in China.

“BHP is not too concerned about short-term supply or short-term pricing in the iron ore market,” Peter Esho, chief market analyst at Invast Securities Co., said by phone. “They are a globally dominant supplier of iron ore and they can withstand pricing pressure because their cost of production is a lot stronger than peers.”

BHP gained 0.4 percent to A$37.94 at the close of trading in Sydney trading. The benchmark S&P/ASX 200 Index gained 0.6 percent.

The company, the world’s third-largest iron ore exporter, raised its full-year iron production estimate by 2.4 percent to 217 million tons. It reported record production for four commodities and 10 operations in the nine months to March 31.

‘On Track’

“Group capital and exploration expenditure remains on track to decline by 25 percent in the 2014 financial year, before declining again next year,” Chief Executive Officer Andrew Mackenzie said in the statement.

Rio Tinto Group, the world’s second-largest mining company, yesterday reported first-quarter iron ore production rose to a record, swelling global supply that’s forecast to head into surplus this year.

Slowing steel production growth in China will hurt demand for iron ore and there’s potential for “further large downside price reactions,” Goldman Sachs Group Inc. said in an April 13 report, in which it said it was “bearish” on iron ore.

Growth in China, the biggest iron ore buyer, slowed to 7.4 percent in the first three month of the year, the weakest pace in six quarters and missing the 7.5 percent annual growth target after the government reined in a credit boom and toughened regulation to combat pollution. This compares with the 7.3 percent median estimate in a Bloomberg News survey of analysts.

BHP cut expected output of petroleum products to 245 million barrels of oil equivalent after the sale of assets in the U.K. Petroleum production gained 3 percent to 60.9 million barrels, missing a median forecast of 63.5 million barrels.

Escondida Resource

Copper output rose 2 percent to 413,900 tons as the company announced a 28 percent rise in the mineral resource at Chile’s Escondida mine, the world’s largest.

Full-year spending on the Jansen potash project in Canada will be cut by about 25 percent below earlier guidance of $800 million during fiscal 2014, the company said.

“We will continue to modulate the pace of development as we see to time our entrance to meet market demand,” the company said.

BHP is considering spinning off its aluminum, nickel and bauxite assets in a A$20 billion ($19 billion) deal, the Australian Financial Review reported last month.

Before it's here, it's on the Bloomberg Terminal.