21st Jan 2015 12:03
LONDON (Alliance News) - Mining giant BHP Billiton PLC Wednesday said iron ore and petroleum production declined in its second quarter from its first, whilst it saw growth in its copper and coal production as it reiterated its production guidance for 2015.
The company also warned that it will be making a significant impairment charge on its accounts for financial year 2015 alongside an exceptional tax charge.
BHP's global iron ore production for the second quarter, totalled 56.4 million tonnes, down 1% from the first quarter. Iron ore production grew by 16% in the second quarter from a year earlier, while smaller rival Rio Tinto PLC had said on Tuesday it produced 79.1 million tonnes in its fourth quarter, representing a 12% rise from the same quarter a year earlier.
BHP Billiton's second quarter and Rio Tinto's fourth quarter both ended on December 31.
BHP's total petroleum production dropped 6% quarter-on-quarter to 63.6 million barrels of oil equivalent. Production of metallurgical coal totalled 13.6 million tonnes in the second quarter, up 17% from the previous quarter whilst copper production rose 6% to 423,700 tonnes.
In BHP's full first half, iron ore production increased by 16% from the same period a year earlier to 113.4 million tonnes compared to 97.6 million tonnes.
Metallurgical coal production was up 21% in the first half to 26.3 million tonnes from 21.7 million tonnes in the same period a year earlier, whilst energy coal production totalled 36.5 million tonnes from 37.4 million tonnes, a 3% fall.
Copper production fell by 4% year on year in the first half to 813,100 tonnes from 843,200 tonnes whilst total petroleum production increased by 9% to 131 million barrels of oil equivalent year on year.
"In Petroleum, we have moved quickly in response to lower prices and will reduce the number of rigs we operate in our onshore US business by approximately 40% by the end of this financial year," said BHP Chief Executive Andrew Mackenzie.
During the first half, BHP's production of zinc grew by 20% year on year and gold grew by 21%, with lead production seeing a 6% increase. Silver and uranium both took minor hits with molybdenum production in the first half reducing by 86% compared to year earlier.
Production of aluminium dropped 16% in the first half as nickel production fell 11%, whilst alumina and the production of manganese ores and alloys all increased in the first half compared to year earlier.
The miner said it achieved first half production records across eight operations and five commodities.
"Our operational performance over the last six months has been strong. We are reducing costs and improving both operating and capital productivity across the group faster than originally planned. These improvements will help mitigate some of the impact of lower commodity prices, and we remain alert to opportunities to further increase free cash flow," added Mackenzie.
The company noted that production guidance for 2015 remains unchanged and is on track to deliver group production growth of 16% over the two years to the end of the 2015 financial year.
Looking ahead to all of financial year 2015, the company continues to expect total iron ore production of 225 million tonnes, total petroleum production of about 255 million barrels of oil equivalent, copper production of 1.8 million tonnes, total metallurgical coal production of 47 million tonnes and total energy coal production of 73 million tonnes.
BHP Billiton said it expects underlying attributable profit in the first half to include impairment charges in the range of about USD200 million to USD250 million recognized as a result of the divestment of conventional petroleum assets in north Louisiana and unconventional gas assets in the Pecos field in the Permian Basin in Texas.
In addition, BHP will record an exceptional item for a USD809 million for an Australian income tax charge.
Further, the company noted that it continues to believe that its planned demerger will help support further improvements in operating performance in both the core BHP Billiton and South32 assets.
On December 8, BHP Billiton announced that the new company it intends to create through its proposed demerger will be called South32. The majority of the demerged company's asset will be in the southern hemisphere or near the equator.
A final board decision on the proposed demerger will be made once all necessary approvals have been secured, BHP said.
The demerger remains on track to be completed in the first half of the 2015 calendar year, with a shareholder vote taking place in early May 2015.
"We continue to believe that our planned demerger will help support further improvements in operating performance in both the core BHP Billiton and South32 assets. Within BHP Billiton, it would allow us to identify and deploy best practice across our assets more quickly and simplify our organisation to reduce overheads," said Mackenzie.
For the first half of 2015, BHP's petroleum exploration expenditure was USD268 million, of which USD244 million was expensed. The company spent USD154 million on minerals exploration, of which USD115 million was expensed.
At the end of the December 2014, BHP Billiton had seven major projects under development with a
combined budget of USD13.5 billion
BHP shares were up 0.4% to 1,398.00 pence per share on Wednesday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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