BHP Billiton Ltd, the world’s largest mining company, is powering ahead by boosting its iron ore output, adding to a global oversupply and keeping pressure on prices.
Output is expected to rise 6 percent to 247 million tonnes in fiscal 2016 (ends June 30 next year), from 233 million tonnes in fiscal 2015, the Melbourne-based producer said yesterday in a statement.
Output from its Western Australian mines, including third-party tonnes, is forecast to jump to 270 million tonnes.
Expansions by the largest producers, including BHP, Vale SA and Rio Tinto Group, are adding to a global surplus as demand stagnates in China, the biggest buyer. BHP realized an average price of US$53 a tonne for its iron ore in the six months to June, down 24 percent from US$70 in the previous six months.
“Iron ore at US$50 a tonne is still offering a very good margin for them,” Fat Prophets analyst David Lennox said by telephone. “It’s not as brilliant as it once was, but they are still making money out of it, and that’s the key.”
The global surplus would rise to 83.2 million tonnes in 2020 from a forecast 58.1 million tonnes this year, according to Morgan Stanley forecasts.
The seaborne market would hit 1.4 billion tonnes this year, it predicted.
BHP expects further productivity improvements to lift its output, including third-party tonnes, to 290 million tonnes over time.
According to the statement, BHP expects to book an after-tax net loss of about US$2.1 billion on the demerger of assets into South32 Ltd, which began trading in May. BHP had earlier said the separation would incur a one-off after-tax cost of US$641 million.
The producer also expects to book additional charges of as much as US$650 million against its underlying attributable profit on its copper, petroleum and US onshore operations. Weaker commodity prices will also trim earnings in the year to July by about US$382 million, it said.
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