August 19 is the next big date for BHP Billiton (BHP) and its tens of thousands of shareholders, large and small.
That’s when the group’s 2013-14 results will be announced, with analysts looking for more news on the potential spin off and capital management.
And in the wake of yesterday’s June quarter and financial year operations report, market expectations have risen of news on both fronts.
And that’s why the shares jumped 1.8% to $39.21 on the ASX yesterday after the operations report was released. They then eased in afternoon trading to end up 0.9% at $38.86.
CEO, Andrew Mckenzie made it clear that close focus on costs and productivity wouldn’t change in his brief comments yesterday.
He said BHP would continue its focus on productivity improvements (cost cuts and ‘de-bottlenecking’) and disposals of non core assets, such as the WA nickel business and some aluminium and thermal coal assets, almost two years after the mining industry began slashing costs following a decade long investment boom.
And analysts said the strong production figures should enable BHP to implement plans to return cash to shareholders at its upcoming 2014 results. That prospect had been put in doubt by the sharp fall in iron ore prices in the June quarter.
Statements about efficiencies and productivity always gets the bottom lines of analysts and shareholders racing, and Mr McKenzie said the right words yesterday.
BHP has bought and sold $6.7 billion of assets in the past two years, but the suggested spin off will be the biggest so far, if and when it happens.
BHP forecast annual iron ore production would rise to 245 million tonnes this financial year (a move analysts described as a surprise and a positive from the report).
Driving that growth will be the new Jimblebar mine and the focus on productivity.
BHP again said it had a low cost option to expand Jimblebar from its rated capacity of 55 million tonnes a year which will drive the company’s iron ore production to an annual level of 270 million tonnes in the nor too distant future.
There was no date given for this move.
Since the start of 2014 iron ore prices have fallen by 30%.
Investment bank UBS reckons BHP has a break-even price of US$53 per dry metric tonne of iron ore produced (the current world price is around $US95 a tonne), meaning that it can make a profit at current prices.
Rio and Fortescue can also make a profit at current prices, as well as Vale in Brazil. Arrium can with its ore from South Australia, but others here and in China are struggling, as we pointed out earlier in the year.
In the company’s petroleum division, production guidance for 2015 was lower than analysts had expected at 255 million barrels of oil equivalent. That was despite the output in 2013-14 of 246 million barrels of oil equivalent.
That’s because of lower production of shale gas in the US, as the company moves to build its output and sale of liquids (the US government recent decided to allow liquids to be processed and exported, and not crude oil).
Liquids output rose 18% in the year to June and will again be higher in 2014-15. Higher liquids output from the Atlantis field in the Gulf of Mexico is again expected to help.
Nickel production fell 7% in the year to June, meaning BHP missed out on the huge rise in world prices in the January-June period which hit 50% in June.
But BHP did enjoy some of the price rise and it reported that its average received price for nickel was 20% in the second half of the financial year compared to the first half.
Production at the Nickel West assets in Western Australia was 4% lower over the year, due mainly to the closure of the Perseverance mine in December.
The company also increased the mineral resource estimate of its West Australian iron ore mines by 13% to a total of more than 20 billion tonnes.
This morning Dow Jones reported that BHP and Anglo-American were in talks to sell their jointly-owned portfolio of manganese assets in South Africa and Australia.
The assets include two mines in South Africa, one in Australia, and processing plants in both countries. BHP has 60% of the venture, Anglo, the other 40%. The possible price could be more than $US1.2 billion, with BHP raising close to $US700 million if the sale happens
