BHP Iron Ore Production Gains to a Record on Expansions

Oct 19, 2011(Bloomberg) -- BHP Billiton Ltd. (BHP), the world’s largest mining company, reported record first-quarter iron ore production, driven by demand from steel mills in Asia and expansions at its Australian mines.

Output was 39.57 million metric tons in the three months ended Sept. 30, compared with 31.98 million tons a year earlier, Melbourne-based BHP said today in a statement. That compares with Credit Suisse Group AG’s estimate of 35.05 million tons.

BHP, which in March approved a $7.4 billion expansion to boost output at the Western Australian iron ore mines, joins Rio Tinto Group in reporting higher quarterly production. China’s ore demand is holding after the economy grew 9.1 percent in the quarter, Vale SA, the world’s largest producer, said yesterday.

"Chinese GDP and Chinese industrial production data still point to pretty robust growth ahead,” said Peter Jolly, head of market research in Sydney at the investment-banking unit of National Australia Bank Ltd. (NAB)

BHP shares were unchanged at A$36.40 at the close of trading in Sydney.

BHP’s Australian iron ore operations “continued to benefit from the dual tracking of the company’s rail infrastructure, increasing overall system capability,” the company said today. BHP’s iron ore division is the company’s biggest earning unit.

Cash Prices

Cash prices for iron ore have dropped to the lowest in almost a year on concern expansion in China, the biggest consumer of the raw material, may slow as Europe’s debt crisis drags on a global recovery. The nation’s expansion in the third- quarter was the slowest pace in two years.

"We have a lot of volatility in the market but overall prices are still basically pretty high because in reality Chinese growth remains pretty robust,” National Australia’s Jolly said.

London-based Rio Tinto reported a 5 percent increase in iron ore output and coking coal reached a record in the quarter, recovering from severe weather in early 2011 that hurt shipments from Australia.

BHP also set production records at coal operations in Australia’s New South Wales state and in Colombia, as well as at the Alumar alumina and aluminum refinery in Brazil. Ore shipments from Western Australian rose to a record annualized rate of 173 million tons.

Total petroleum output, BHP’s third-biggest earning unit, rose 19 percent following the acquisition of shale assets in the U.S., while copper output dropped 24 percent because of lower grades and strikes at Escondida in Chile as well as planned maintenance and outages at Pampa Norte in Chile and Olympic Dam in Australia, it said.

Queensland Floods

Full-year spending on petroleum exploration, excluding onshore U.S., is forecast at $1 billion, BHP said.

Output of coking coal, BHP’s fourth-largest earner, slid 10 percent to 9.29 million tons as it continued to be crimped by the earlier flooding and rain. The mines also face the threat of further strikes after the workers rejected the company’s offer for a new employment contract last week.

"At this stage it is not possible to determine when the labor negotiations will conclude,” BHP said. Kelly Quirke, a company spokeswoman, said today the affect of the labor dispute on coking coal production has been “modest.”

Lower volumes are forecast this quarter from the Illawarra coal unit because of planned plant shutdown, the company said.