Olympic dam weighs as BHP Q3 iron ore output jumps 11%, but copper slumps 19% (April 2010)

Olympic dam weighs as BHP Q3 iron ore output jumps 11%, but copper slumps 19% (April 2010)

Saturday, April 24, 2010

The numbers, which trail those of Rio Tinto, disappointed some expectations
Author: James Regan (Reuters)

SYDNEY (Reuters) -

Global miner BHP Billiton (BHP.AX: Quote)(BLT.L: Quote) posted an 11 percent annual rise in iron ore production in the March quarter, trailing a much faster expansion by rival Rio Tinto (RIO.AX: Quote)(RIO.L: Quote) and disappointing some expectations.

It said copper production slumped 19 percent, primarily due to disruptions at its Olympic Dam mine, and foreshadowing weak figures for the quarter ahead as operations at the mine will not return to normal until the end of June.

Analysts said the iron ore figures did not alter the long-term picture and BHP was likely to maintain forecasts to lift iron ore output to 200 million tonnes over the next two years as it looks to beef up activity to feed Asia's booming manufacturing.

Rio Tinto, which reported a 39 percent jump in iron ore production for the quarter, is also expanding, looking to lift capacity to 234 million tonnes by the end of this year.

"Quarter-on-quarter all the major units are down except petroleum -- that is iron ore, copper, coal and met coal," said Peter O'Connor a resources analyst for Bank America Merrill Lynch.

"On a year-on-year basis it looks okay, except for copper, but I think most people will be trimming earnings forecast just a bit on these numbers -- perhaps a cent or two (per share) but nothing major".

At 0243 GMT, BHP shares were flat while Rio Tinto was trading 0.5 percent higher, trailing the broader market's 0.7 percent rise.

"There's not a lot of joy in terms of positive surprises," said Tim Schroeders, a portfolio manager at Pengana Capital, adding that copper figures were especially weak.

BHP's difficulties with the Olympic Dam mine, the world's fourth largest copper deposit, are likely to keep pressure on world supplies and also prevent the firm from taking advantage of a 5 percent jump in copper prices CMCU3 in the March quarter.

"Copper production was a bit light and that adds to the whole scenario that the supply side on the copper industry is very tight," said Michael Bentley, portfolio manager for Northward Capital.

Industrial action in Chile and mining of lower grade ores at the Escondida and Cerro Colorado mines in Chile and at Antamina mine in Peru also contributed to the drop in copper output, BHP Billiton said.

At Escondida, BHP Billiton's share of copper concentrate output rose 17 percent to 101,500 tonnes, though cathode production dropped 20 percent to 36,200 tonnes.

Production of iron ore, BHP Billiton's top revenue earner, climbed 2.97 million tonnes on the year to 31.16 million, although was down on the previous quarter, with the firm saying that weather related disruptions held back production.

A new pricing regime started on April 1, with reports that BHP is getting $131 a tonne for its ore under April-June contracts based on the average January-March average spot price -- more than twice last year's fixed price.

The price over the following three months will be determined by the indexed, or averaged, spot price between April and June.

U.S and European steelmakers are in early stages of recovery and China's appetite for imported ore, at least for now, refuses to abate, suggesting even higher prices next quarter.

Metallurgical coal production, another steel making raw material and a key commodity in Asia's economic boom, rose 7 percent but weather difficulties adversely affected output. (Additional reporting by Cecile Lefort and Bruce Hextall in SYDNEY and Victoria Thieberger in MELBOURNE; Editing by Balazs Koranyi and Michael Urquhart)

© Thomson Reuters 2010 All rights reserved

Olympic dam weighs as BHP Q3 iron ore output jumps 11%, but copper slumps 19% (April 2010) Reviewed by NajlA On Saturday, April 24, 2010, at 8:58 PM Rating: 5
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