On a roll … BHP has lifted its 2014 iron ore output guidance. Photo: Louie Douvis
Earlier than expected production from a new mine helped to push BHP Billiton’s September quarter iron ore output to a new peak, paving the way for the company to upgrade its production forecast for iron ore.
The rise came amid increases in output for other key group products such as petroleum products, coal and copper.
BHP’s third-quarter production of iron ore surged 23 per cent year-on-year to 48.8 million tonnes. Petroleum product output rose 2 per cent year on year to 62.7 million barrels of oil equivalent, the miner said in a release this morning.
Output of coking coal rose by 14 per cent year-on-year to 10.2 million tonnes as steaming coal output rose a more modest 3 per cent to 19.6 million tonnes.
Copper production rose by 6 per cent to 403,300 tonnes.
Iron ore forecast raised
BHP said the ongoing optimisation of production systems in the Pilbara region of Western Australia had helped it to raise forecast 2014 production of iron ore to 212 million tonnes.
Full-year production forecasts for the other key sectors of oil products, coal and copper were unchanged. it said.
BHP’s shares jumped 1.8 per cent to $ 36.85 in early trade, as investors cheered the production numbers.
‘‘You will continue to see these guys push out more iron ore,’’ said Chris Drew, an analyst in Sydney with Royal Bank of Canada. ‘‘You’ve seen an upgrade to iron ore expectations for the year, which should support earnings.’’
Jumblebar starts production
Helping to lift output of iron ore was initial production from the Jimblebar mine which, together with de-bottlenecking measures would lift iron ore capacity to an estimated 220 million tonnes, it said.
At maximum production, this mine will be able to produce an estimated 35 million tonnes of iron ore annually.
Productivity gains coupled with the use of mobile crushing units had enabled the group to raise the forecast 2014 iron ore production forecast by 5 million tonnes, it said.
Additionally, cost-reduction efforts continued, with a 25 per cent reduction in capital and exploration spending for fiscal 2014 to $ US24 billion, and ongoing cuts flagged.
Analysts said the earlier than flagged start up of the large Jimblebar iron ore mine in the Pilbara helped lift output of this division in the quarter, as the company drives hard to access higher iron ore prices, which are holding well above $ US100 a tonne, which is much higher than most forecasts.
The lift to iron ore output from Jimblebar is the prime reason for system output being raised to more than 220 million tonnes annually, analysts said.
Talk of lift in petroleum
Additionally, there could be an upgrade to petroleum division output forecasts, given that full year output forecast has been held.
“While full-year guidance has been maintained at 250 million barrels of oil equivalent, BHP is already running at this rate and would appear comfortably on-track given the back-end-loaded nature of the US onshore production ramp up (although some of this will be offset by planned downtime at Pyrenees and ongoing field decline),” one analyst told clients in response to this morning’s production data.
“Reassuringly, capital management appears to be taking on added significance with management stressing BHP’s growing discipline … (pointing to a $ US16 billion capex ceiling to increase competition for capital and a determination to only invest in the highest returning projects or not invest at all).
“We see capital management as set to emerge as perhaps the most significant share price driver in an environment offering less macro support.”