BHP Billiton Ltd expects market conditions to remain uncertain in the medium term, and is reviewing all of its operations, as the mining giant's iron ore output fell one per cent in the third quarter and copper production tumbled 14 per cent.
The global mining giant said it expected a 30 per cent drop in annual output from the world's biggest copper mine, Escondida, following the surprisingly sharp drop in copper output in the March quarter and it stood ready to halt production as demand weakened.
However, BHP Billiton said it was in a unique position to continue to invest in future growth, with a strong balance sheet and low financial and operational debt.
"We are also well placed to take advantage of opportunities in the market, but with our usual disciplined approach," BHP Billiton said.
BHP produced 28.19 million tonnes of iron ore, a key ingredient in steelmaking, in the three months ended March - one per cent lower than the previous corresponding period, owing to temporary suspensions arising from safety incidents and cyclone interruptions.
But BHP said it achieved record iron ore production and shipments for the nine months ended March, growing six per cent to 87.37 million tonnes, as the company expanded its operations.
"Against a backdrop of weak demand, BHP Billiton achieved sound operational results," the miner said in a statement to the Australian Securities Exchange (ASX).
"In the medium term, we expect that market conditions will remain uncertain," said BHP, which has been cutting production and shelving projects amid the worst global recession in decades.
"All our operations will remain under review. We will continue to take appropriate actions in any business that is cash negative and set to remain so, or where there is lack of demand."
Last year, the Escondida mine in Chile produced one million tonnes of copper, or just under five per cent of global output. BHP owns 57.5 per cent of the mine. Rio Tinto Ltd holds 30 per cent and Mitsubishi Corp 10 per cent. Rio has agreed to sell China's Chinalco group half its stake.
BHP said Escondida production had been hurt by a lower ore grade and weaker output from milling operations.
"The copper number is particularly of concern because copper is a bellwether of the wider state of the industrial commodities sector," Andrew Harrington, Sydney-based mining analyst for the Patersons brokerage, said.
Escondida mills, which crush the ore, are running below capacity because of electrical problems at the site. BHP expected to fix these problems during the September quarter.
A BHP spokeswoman said the company had initially anticipated Escondida production to slip by around 20-25 per cent in the company's fiscal year to June 30.
Copper, widely used in power and construction, has shed more than six per cent of its value this week, though the price is up nearly 50 per cent since January, leading some analysts to suggest the worst of the commodities bust may have passed.
So far, BHP's biggest curtailment has been in nickel, with the recently announced closure of the Ravensthorpe nickel mine in Australia, and analysts say more cutbacks could follow in other commodities, such as alumina and aluminium.
Coal output in Australia already has turned down as Asian steel-mills hit hard times. Iron ore, another steel-making commodity, is also feeling the pinch.
BHP reported a one per cent drop in iron ore production and four per cent fall in aluminium output. Nickel output rose 10 per cent in the quarter but the Ravensthorpe closure has yet to flow through to production data.
Source: Business Spectator
No comments:
Post a Comment