BHP hit by cost blow-outs

BHP (bhp.ASX:Quote,News) posted a record in quarterly aluminium production from continuing operations, excluding Valesul in Brazil. Total aluminium production rose 1 per cent to 337,000 tonnes, while alumina production was up 5 per cent to 1.078 million tonnes.

The world's largest miner posted a 4 per cent dip in total petroleum products production compared to the same quarter last year to 30.52 million barrels of oil equivalent.

But copper production was depressed by strike action at the Escondida copper mine in Chile.

Copper production fell by 19 per cent to 249,900 tonnes from the same quarter last year, also impacted by scheduled maintenance at Olympic Dam in Australia and the sale of Tintaya in Peru.

Energy coal production fell 9 per cent from the same period last year to 21.782 million tonnes, with a negative impact from challenging geological conditions at New Mexico Coal in the US.

Nickel production also rose 1 per cent to 44,500 tonnes during the quarter, while lead production slumped 25 per cent to 48,977 tonnes, zinc fell 18 per cent to 24,011 tonnes, silver dipped 35 per cent to 7.349 million tonnes and uranium also declined 27 per cent to 793 tonnes.

BHP Billiton said lead and silver production were in line with expectations, as it continued rehabilitation of ground support at Cannington in Australia.

Uranium production was impacted by planned maintenance at Olympic Dam, while zinc production fell due to lower head grades at Cannington and Anatmina in Peru.

The mining giant previously flagged cost increases of at least 30 per cent at its Atlantis South Development in the Gulf of Mexico, but today said the budget blow-out would likely be higher.

"A detailed review for cost estimates continues as the project's schedule becomes more certain,'' BHP Billiton said.

"Capital cost pressures are likely to result in a capital cost increase of more than 30 per cent in excess of the currently approved budget.''

BHP Billiton had previously approved a revised budget of $US1.1 billion ($1.45 billion) for the project, which is operated by UK-based BP Plc.

The miner also confirmed that its share of costs at the North West Shelf Expansion have increased by 20 per cent to $US300 million ($396.17 million), with first production expected by late 2008.