BHP First-Quarter Iron Ore Output Jumps 7% to Meet Estimates

  • Producer says to cut annual petroluem capital expenditure
  • Approvals won to extend Chile copper mine permits to 2023

BHP Billiton Ltd., the world’s biggest mining company, said first-quarter iron ore output rose 7 percent, joining rivals Vale SA and Rio Tinto Group in reporting increased supply amid falling prices and a global glut.

Production was 61.3 million metric tons in the three months ended Sept. 30, Melbourne-based BHP said Wednesday in a statement. That compares with 57.1 million tons in the same period a year earlier and with a median of 61.9 million tons of three analysts surveyed by Bloomberg.

Benchmark iron ore prices have fallen more than 70 percent from a 2011 peak amid slowing economic growth in China and as the largest suppliers raise output to boost savings and squeeze out higher-cost rivals. BHP reported a 4 percent drop in petroleum output and flagged a 6 percent decline in the unit’s capital spending this fiscal year.

“The iron ore result is as expected and is a good result, though we’d expected petroleum to be higher,” said David Lennox, a resource analyst at Fat Prophets in Sydney.

BHP rose 1 percent to A$24.23 in Sydney trading, trimming its decline this year to 12 percent. The Bloomberg World Mining Index of 81 producers has slumped 23 percent this year.

Iron ore was the only of BHP’s product divisions to increase output with copper and petroleum production declining and coal little changed. BHP will cut planned petroleum capital expenditure this fiscal year to $2.9 billion, including U.S. onshore field spending of $1.4 billion.

Longest Slump

Commodities suppliers are slashing capital expenditure, cutting debt and seeking to bolster balance sheets with raw materials prices mired in the longest slump in decades on weaker growth in China, the largest consumer of metals to grains.

Petroleum output fell to 64.5 million barrels of oil equivalent on field decline and the impact of industrial action at Australia’s Bass Strait, BHP said. That beat the median estimate of 62.2 million barrels estimate among four analysts.

BHP “acquired prospective oil acreage in Western Australia and the Western Gulf of Mexico and will continue to invest through the cycle to create value for shareholders,” Chief Executive Officer Andrew Mackenzie said in the statement. The producer purchased about 13,000 square kilometers (5,000 square miles) in the Beagle sub-basin in Western Australia, BHP said.

Copper Decline

Copper output declined 3 percent to 377,300 tons, beating the 368,000 ton median estimate among five analysts, as declining grades curbed production at Chile’s Escondida, the world’s biggest copper mine. BHP has received approvals to extend operational permits to 2023 at its Cerro Colorado copper mine in Chile. While coal production was flat, BHP reported first coking coal output from its Haju mine in Indonesia.

Total iron ore output, including third-party tons, from Western Australia rose 8 percent to 67.2 million tons and the company reiterated its full-year guidance of output of 270 million tons from mines in the Pilbara district. Output at Brazil’s Samarco rose to 3.7 million tons, it said.

While prices will dip in 2016, iron ore will rebound as more higher-cost supply is shuttered and on rising world steel production, according to Australia’s Department of Industry & Science. Iron ore will average $53 this year and $51 in 2016, rising back to $75 a ton by 2020, it said this month.

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