BHP Billiton Cuts Annual Coking Coal, Copper Guidance -- Update

By Ben Collins Features Dow Jones Newswires

WELLINGTON, New Zealand--A lengthy strike at a mine in Chile and cyclone damage to rail lines in eastern Australia dented BHP Billiton Ltd.'s (BHP.AU) output in the last quarter, prompting it to scale back annual targets for coking coal and copper.

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The world's largest listed miner by market value also narrowed its guidance for iron-ore production after unseasonably wet weather but stuck with forecasts for energy coal and petroleum despite some weakness.

Copper production fell 20% to 939,000 metric tons over the nine months to March 31, including a 36% quarter-over-quarter drop in output in the third quarter, as volumes were held back by a 44-day strike at the Escondida mine in South America.

As a result, BHP said it now expected production for the fiscal year of between 1.33 million and 1.36 million, a sharp drop on the 1.62 million forecast three months ago when BHP scaled back guidance by 2% to reflect a fall at its Olympic Dam mine in South Australia thanks to maintenance and after a state-wide power outage.

Weak copper production had been widely anticipated after Rio Tinto PLC (RIO.LN), co-owner of the Escondida mine, reined in its own mined copper target for 2017 due to the pay strike.

BHP's production of coking coal, used along with iron ore to produce steel, rose by 2% over the nine-months through March to 31 million tons thanks to record output at five mines in Australia's eastern Queensland state but was held back in the third quarter by tropical cyclone Debbie, which struck the east coast with high winds and heavy rains.

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Due to damage to the rain network of operator Aurizon Holdings Ltd. (AZJ.AU) caused by the cyclone, BHP said it now expected coking coal production of 39 million-41 million tons, down from a January target of about 44 million.

Energy-coal production for the nine months was broadly flat at 21 million tons, and BHP said it continued to expect full-year output of 30 million.

Nine-month iron-ore production from mines in Western Australia rose 3% on-year to 171.2 million tons, although wet weather in the third quarter meant a drop of 11% quarter-over-quarter. For the fiscal year, BHP said it now expected its share of output from its iron-ore mines to be between 231 million and 234 million tons against an earlier target of 228 million-237 million.

Rio Tinto's shipments of iron ore from Western Australia fell 13% on-quarter for the first three months of 2017 due to cyclone activity and heavy rainfall in the period, although it stuck with a target of 330 million-340 million for the year.

BHP swung back to profit in its fiscal first half, helped by higher commodity prices, continued cost cutting and the absence of large writedowns that had dented its bottom line a year earlier. Still, earlier this month activist investor Elliott Management Corp. in an open letter urged the company to spin off its U.S. petroleum assets and unify its dual U.K.-Australia structure to unlock billions of dollars in shareholder value. BHP has rejected the New York hedge fund's plans as too costly.

The resources company on Wednesday said it was pushing ahead with efforts to sell non-core onshore U.S. acreage, with a sale process well advanced for up to 50,000 acres of the southern Hawkville and a review underway to potentially sell its Fayetteville field. Still, it said it was also increasing onshore activity and had approved two additional rigs for the Haynesville assets, with natural-gas prices hedged to deliver what it said would be an attractive rate of return.

Across the company's petroleum business, which includes assets in the Gulf of Mexico and Australia, production for the nine months was 15% lower than the same period the year before at 157 million barrels of oil equivalent but BHP said it still expected output for the fiscal year of 200 million-210 million barrels.

Write to Ben Collins at ben.collins@wsj.com

(END) Dow Jones Newswires

April 25, 2017 20:59 ET (00:59 GMT)