Like rival Rio Tino, BHP Billiton has reported a cracker of a quarter for its iron ore business in the three months to September.
Iron ore production surged to new highs, mirroring the performance of Rio’s WA operations, coal output rebounded, as did Rio’s and in the case of BHP alone, its petroleum business saw a surge in output as the US shale gas expansion kicked in.
But investors were unimpressed by the update and BHP shares finished steady at $36.40 yesterday after touching a high of $36.82.
BHP said in its production report that:
"Western Australia iron ore shipments rose to a record annualised rate of 173 million tonnes per annum in the September 2011 quarter (100% basis), a 28% increase over the previous corresponding period.
"Petroleum production increased 19% in the period, reflecting the successful acquisition of the Fayetteville and Petrohawk Onshore US shale businesses on top of strong operating performance from existing assets.
"Quarterly production records were also achieved at New South Wales Energy Coal and Illawarra Coal (both Australia), Cerrejon Coal (Colombia) and the Alumar refinery (Brazil). Record material mined and milling rates at Antamina (Peru) coincided with a significant improvement in copper grades."
The improvement in WA iron ore shipments was more than the market had forecast and means BHP, like Rio and smaller rival Fortescue have yet to be troubled by reports of falling demand from China for iron ore.
And by boosting production and sales they are offsetting the small fall in prices.
BHP Billiton posted a higher-than-expected 24% rise in quarterly iron ore output, but also reported a further drop in output from its flagship Escondida copper mine in Chile.
Iron ore output for the September quarter totalled 39.57 million tonnes compared with 31.98 million in the year ago period and 35.53 million in the June quarter of this year.
The jump in iron ore shipments was due to the dual tracking of BHP’s rail infrastructure, which has increased system capacity, BHP explained.
First quarter petroleum production of 51.4 million barrels of oil equivalent (boe) was 19% above the same quarter of last year and the June quarter of this year.
The higher petroleum production reflected the acquisition of the Fayetteville and Petrohawk shale businesses in the United States, plus a strong operating performance from existing assets, BHP said.
Copper production in the three months to September was down 24% on the previous corresponding period, and down 19% on the June quarter.
Industrial action at Escondida in Chile and planned smelter and refinery outages at Olympic Dam impacted on copper production in the first quarter, BHP said.
Looking at BHP’s major commodities for the quarter:
Total petroleum production – Petroleum production increased 19 per cent in the period, reflecting the successful acquisition of the Fayetteville and Petrohawk Onshore US shale businesses on top of strong operating performance from existing assets.
Crude oil, condensate and natural gas liquids – Liquids production increased on the June 2011 quarter following strong operated field performance, development drilling at Shenzi (USA) and new volumes from the Onshore US assets.
This was partly offset by shutdowns associated with non operated maintenance and drilling deferrals in the deepwater Gulf of Mexico (USA). Importantly, Mad Dog (USA) production is expected to recommence by the end of the 2011 calendar year following a period of maintenance related downtime.
Natural gas – Natural gas production was higher than all comparable periods and reflected approximately 40 days of production from the recently acquired Petrohawk shale assets and a full quarter of production from the Angostura Gas Phase II project (Trinidad and Tobago).
Alumina – Consistent performance from the expanded refinery capacity facilitated record quarterly production at Alumar and a modest increase in total alumina production in the period.
Aluminium – Production was in line with comparable periods with all operations running at, or close to, effective capacity.
Copper – Lower ore grades and industrial action at Escondida (Chile), planned maintenance activity at Pampa Norte (Chile) and planned smelter and refinery outages at Olympic Dam (Australia) all impacted copper production in the period.
Record material mined and milling rates were, however, achieved at Antamina and coincided with operations progressing through a copper rich ore zone.
Due to industrial action that impacted operations in the September 2011 quarter, Escondida production is now expected to be marginally lower in the 2012 financial year with volumes weighted to the second half.
Production is expected to improve beyond the 2012 financial year as mining activities progress towards higher grade ore with completion of the Escondida Ore Access project in the main pit.
Lead/zinc/silver – A broad decline in average ore grades across the Antamina and Cannington (Australia) operations resulted in lower production relative to all comparable periods.
Uranium – The steady grade profile of the Olympic Dam ore body w
