BHP volumes miss expectations

ScreenHunter_07 Nov. 26 16.13

BHP’s December quarter production report is out this morning and is another reason to be leery of iron ore stocks today. Here’s the iron ore division detail:

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Iron ore – Iron ore production increased by 19 per cent in the December 2013 half year to a record 98 million tonnes.

WAIO achieved record production of 108 million tonnes (100 per cent basis) for the December 2013 half year, despite weather related downtime and an increase in planned maintenance during the December 2013 quarter.

This record result reflected strong operating performance, the early delivery of production from Jimblebar and a series of volume enhancing productivity initiatives, which included increased utilisation rates for several relocatable crushers installed at our operating mines. While these crushers have increased the capacity of our supply chain at a low capital cost and contributed to a significant rise in profitability, the previously signalled increase in the strip ratio at WAIO has more than offset the unit cost savings achieved across the broader supply chain.

Our WAIO business continues to perform strongly, however we have maintained production guidance of 212 million tonnes (100 per cent basis) for the 2014 financial year given the general uncertainty that exists as we enter the wet season.

The ramp up of phase one capacity at Jimblebar to 35 mtpa (100 per cent basis) is expected to be completed by the end of the 2015 financial year. Longer term, a low cost option to expand Jimblebar to 55 mtpa (100 per cent basis) and the broader debottlenecking of the supply chain are expected to underpin further capital efficient growth in capacity to approximately 260 mtpa to 270 mtpa (100 per cent basis).

Samarco’s (Brazil) three pellet plants continued to operate at capacity during the period.

Total iron ore production guidance for the 2014 financial year remains unchanged at 192 million tonnes.

Guidance may be unchanged but with 56% of the annual target reached in the first half, it is likely to be exceeded barring a major cyclone.

David Llewellyn-Smith