Mining giant BHP Billiton Ltd yesterday said total iron ore production for the nine months to last month jumped to a new high as prices remained near a decade-low, but deferred a project to boost output of the commodity to save costs.
In an operational review for the nine-month period, the world’s biggest miner said it expected iron ore output for the 2015 financial year to increase by 2 percent to 230 million tonnes from its previous guidance.
The deferred project, which involved plans to reduce bottlenecks at a Western Australia port, was postponed as the output from existing infrastructure continued to exceed expectations, the miner said.
“In iron ore, our focus remains on producing at the lowest possible cost, with Western Australia iron ore unit costs now below US$20 per tonne as we continue to improve productivity,” BHP chief executive Andrew Mackenzie said.
Mackenzie said BHP acted quickly to boost its production as Chinese demand for the metal soared over the past decade, with the increased output helping the firm, despite recent sharp falls in the ore price.
“Despite the subsequent increase in supply-side competition, these low-cost expansions continue to deliver attractive margins and returns through the cycle,” he said.
The iron ore price has tumbled by 60 percent over the past year and hit a decade-low of US$47.08 early this month. It was buying just above US$51 early yesterday.
Some of the world’s biggest iron ore miners, including BHP, were last week placed on “credit watch negative” by ratings agency Standard & Poor’s Financial Services LLC (S&P) amid the diving price.
S&P yesterday lowered the credit rating of Australia’s Fortescue Metals Group, the world’s fourth-largest iron ore miner, from “BB+” to “BB” and gave it a negative outlook. It also lowered its debt ratings.
Fat Prophets resources analyst David Lennox said BHP’s result was “pretty sound,” adding: “There was nothing in there that was surprising.”
“Obviously, their iron ore division still roars ahead. Petroleum was a little bit sluggish at only 1 percent growth, but the rest of the business was probably as we would have expected,” Lennox said.
Iron ore output soared by 17 percent in the nine months to last month compared with the previous period, while petroleum production rose 6 percent. Metallurgical coal output jumped by 14 percent and copper production edged higher by 1 percent. Aluminum and nickel output fell by 15 percent and 9 percent respectively.
The Anglo-Australian firm said its plans to demerge parts of its business — including aluminum, manganese, silver and selected coal and nickel operations — into a company called South32 was on track for later this year.
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