Like its iron ore rival and former prospective joint venturer, Rio Tinto, BHP Billiton had solid September quarter in the Pilbara, with production and sales hitting capacity.
In fact, BHP yesterday indicated that it had made a strong start to the financial year, with record quarterly production at its petroleum division and a rise in iron ore output.
The world’s biggest miner said yesterday in its 2011 first quarter report that it increased production for 11 separate commodities including record petroleum production in the three months to September 30.
Iron-ore production in the three months to the end of September rose 6% to 31.98 million tonnes, while copper production climbed 3% and oil and natural-gas production rose 3%.
BHP said the record quarterly petroleum production was "despite the suspension of drilling activities in the Gulf of Mexico (USA). This was driven by strong crude performance at Pyrenees (Australia) and strong liquefied natural gas production at North West Shelf (Australia).
"Other quarterly production records were achieved at Samarco and the Alumar refinery (both Brazil), and for manganese ore, including records at both GEMCO (Australia) and Hotazel (South Africa).
"Despite ongoing uncertainty in the developed world, BHP Billiton remains positive on the prospects for many of its core commodities and the underlying performance of its business due to strength in the emerging economies and the ongoing delay in the supply side response," the company said in the production report.
Despite the good news, BHP was caught up in yesterday’s market weakness, caused by the rate rise in China, BHP’s biggest customer (taking 25% of its sales in the 2010 year).
The shares closed at $40.88, down just 28c after being down 56c in earlier trading.
That was less than the 0.7% fall in the market, which in turn was half the size of the fall in the morning.
Spot iron ore prices are recovering and currently trade around five months’ highs. China lifted iron ore imports in September after a sharp fall in August.
Quarterly contract prices for iron ore are down a reported 11% or for the three months to December, but demand is reportedly still solid, meaning BHP and Rio should be able to make up the shortfall with higher volumes and sales at higher spot prices.
BHP’s copper output recovered in line with the rebound at the Olympic Dam mine in South Australia following repair to a damaged shaft last year.
But this was partially offset by lower ore grades that crimped output at the company’s Antamina mine in Peru and continuing weakness in ore grades at the huge Escondida mine in Chile.
BHP Billiton has already flagged that Escondida production will drop 5% to 10% this year because of lower ore grades.
It also posted a 10% rise in output of metallurgical coal used in steelmaking, but blamed a 5% drop in energy coal production on heavy rains near its mines.
Rival coal producers and exporters, such as Wesfarmers, Peabody and Xstrata; have reported similar events in the past month, thanks to the wet weather in Queensland and NSW.
But it was not all good, BHP reported rising cost problems and delays in its huge WA iron ore expansion. Some of the delays could add a year to some parts of the projects’ completion dates.
