Woho! BHP is chucking out dirt like a transformer on steriods. From its Q2 production report:
- Strong operating performance delivered a 9% increase in Group production with annual records achieved across 12 operations and four commodities.
- Western Australia Iron Ore achieved a fourteenth consecutive annual production record as volumes increased to 225 Mt (100% basis), significantly exceeding initial full-year guidance. We now expect production of 245 Mt (100% basis) from the Pilbara in the 2015 financial year.
- Metallurgical coal production of 45 Mt exceeded full-year guidance as Queensland Coal achieved record production and sales volumes.
- Copper production increased to 1.7 Mt as an improvement in mill throughput and concentrator utilisation offset grade decline at a number of operations.
- Petroleum production increased by 4% to a record 246 MMboe with an 18% increase in liquids volumes underpinned by significant growth at Onshore US and Atlantis.
- Six major projects were completed and another two projects achieved first production, including the Caval Ridge coal mine which was completed ahead of schedule and under budget in the June 2014 quarter.
And from the iron ore operations:
Western Australia Iron Ore (WAIO) significantly exceeded initial full-year production guidance as the early commissioning of Jimblebar and our productivity agenda raised the capacity of our integrated supply chain. The ramp-up of Jimblebar to 35 Mtpa (100 per cent basis) is now expected before the end of the 2014 calendar year and will support a further 20 Mt increase in WAIO production to approximately 245 Mt (100 per cent basis) in the 2015 financial year. A low-cost option to expand Jimblebar to 55 Mtpa (100 per cent basis) and broader debottlenecking of the supply chain are expected to underpin further growth in capacity towards 270 Mtpa (100 per cent basis).
It was supposed to be producing 225mt! This is good and bad news. It means the iron ore glut is a little larger than thought and therefore price weakness more understandable and the longer term downside risks are slightly mitigated as the glut has less distance to grow. As well, Blind Freddy can see it’s the pick of the sector even if I wouldn’t touch it owing to the iron ore price risks.
The downside is manifold. West Pilbara, juniors, all aspirants, just got caned. Markets may buy them today in the excitement but they shouldn’t. They’re being stalked by a dirt-devouring monster.
The short and medium term price risks just ramped up. BHP has unexpectedly large capacity to drive the shakeout and it appears willing to use it!
Full report here.
