BHP: The Powerhouse

By Glenn Dyer | More Articles by Glenn Dyer

No matter how you look at the production figures released by BHP Billiton yesterday, they paint a picture of a company going full steam ahead, and looking to do better.

Barring natural disasters and with good weather, the output records will be broken in the 2008 financial year, with petroleum, which is marking time, to be boosted by the start up of at least two new projects: Stybarrow and Genghis Khan.

As reported above, the company set annual production records in natural gas, alumina, aluminium, copper, nickel, iron ore, manganese ore, and metallurgical coal, "all underpinned by strong demand" according to yesterday's commentary

The fourth quarter saw copper production rise 17% (compared to the final quarter of the 2006 financial year) to 342,100 tonnes; but aluminium production was flat at 334,000 tonnes, and petroleum production slipped 1% to 30.47 million barrels of oil equivalent (mmboe).

For the year to June, copper production rose 7% to 1.250 million tonnes over 2006, aluminium rose 2% to 1.34 million tonnes and petroleum was flat at 116 mmboe.

Iron ore production in the June quarter rose 6% on the prior corresponding period to 25.746 million tonnes, while it was up 8% over 2006 for the full year to 98.197 million tonnes.

Annual nickel production was up 7% to a record 186,500 tonnes, but uranium oxide concentrate production fell 11% over the 12 months to 3.486 million tonnes. It rose 14% in the June quarter.

Zinc production benefited from improved grade and increased proportion of zinc contained ore processed at Antamina in Peru, with production up 42% during the quarter and 9% over the year to 118, 695 tonnes.

Lead production also rose in the quarter, but fell 21% over the year (Cannington in North Queensland was the culprit) to just over 210,000 tonnes.

Silver production rose 23% during the June quarter to 11.625 million ounces, but fell 20% to 36.565 million ounces.

Manganese ore production improved 9% during the quarter and 14% for the year

Coal exports are expected to continue to be impacted by port delays.

"Third party infrastructure constraints on the east coast of Australia will continue to impact Hunter Valley Coals export sales," BHP Billiton said.

For the year, metallurgical coal production rose 8% to 38.429 million tonnes, while energy coal production climbed 1% to 87.025 million tonnes.

Here's the company's commentary on its production:

………………

Total Petroleum Production – Total production was in line with the year ended June 2006 and higher than the March 2007 quarter. Natural field decline has been offset by improved facility performance and successful development drilling. There were no major project start-ups in the period. Higher seasonal gas demand in Australia also supported the improved result.

Crude Oil, Condensate and Natural Gas Liquids – Production was higher than the March 2007 quarter due to improved operational uptime and successful development drilling which offset natural field decline. Stronger seasonal gas demand also increased condensate production. Natural Gas – Record quarterly performance from Bass Strait led to a 10 per cent increase versus the March 2007 quarter production.

Alumina – Production and sales for the year ended June 2007 were all time records. Record annual output was achieved at all operations due to the continuing ramp up of the Worsley expansion and strong performance at Paranam and Alumar. Worsley exceeded its expanded nameplate capacity in the June 2007 quarter.

Copper – An annual production record was set with the continued ramp up of the Escondida Sulphide Leach Project and Spence (both Chile). This was accomplished despite the impact of the industrial action at Escondida in August 2006. In aggregate, these two projects contributed 134,950 tonnes during the year. Partially offsetting this was lower output from Olympic Dam due to maintenance activities and reduced ore hoisting and grades.

June 2007 quarterly production was higher than the June 2006 quarter reflecting the continued ramp up of the recently expanded capacity.

As of 30 June 2006, the company had 274,280 tonnes of copper sales which were subject to a finalisation adjustment. The finalisation adjustment and provisional pricing impact as at 30 June 2007 will increase earnings (d) by US$108 million for the financial year.

For the year ended 30 June 2007, the Group had 346,610 tonnes of copper sales that were provisionally priced at a weighted average price of US$7,152 per tonne. The final price of these sales will be determined in the 2008 financial year

Silver – Record silver production at Escondida reduced the effect of the rehabilitation of ground support at Cannington (Australia). Production has recovered following the successful completion of the rehabilitation project in the March 2007 quarter.

Lead – Improved performance following the completion of the Cannington rehabilitation project was offset by declining grade.

Zinc – Production was higher than all comparative periods due to improved grade and increased proportion of zinc contained ore processed at Antamina (Peru).

Aluminium – A sixth consecutive annual production record was achieved. Successful implementation of ongoing efficiency initiatives resulted in record or near-record performance at all operations.

Uranium – Variability of ore sources, lower grade, and ongoing maintenance activities at Olympic Dam impacted output for the year ended June 2007. Third party products were purchased from the spot market to meet contractual requirements.

This will decrease earnings (d) by US$81 million for the financial year. The higher production in the current period compared to the June 2006 and March 2007 quarters reflects increased grade and recoveries.

Diamonds – Production increased versus the y

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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