BHP's Second-Quarter Iron Ore Output Rises to Record

Jan. 25-- BHP Billiton Ltd., the world's biggest mining company, said second-quarter iron ore and manganese output rose to records to meet rising demand from steelmakers.

Iron ore output rose 11 percent to 25.4 million tons in the three months ended Dec. 31, from 22.9 million tons a year earlier, Melbourne-based BHP said today in a statement. Alumina and aluminum output also reached all-time highs.

China's iron ore imports rose 19 percent last year to a record as the world's fastest-growing major economy makes more steel to meet rising demand for houses, automobiles and home appliances. BHP said expansion costs of an alumina refinery in Brazil jumped by 40 percent as mining companies face higher bills to complete projects to drive output gains.

``We're approaching peak production rates, and the production report is broadly in line with expectations,'' said Atul Lele, who helps manage A$450 million ($350 million) at White Funds Management, in Sydney. ``But they continue to face costs pressures on their projects.''

The shares rose as much as 45 cents, or 1.7 percent, to A$26.35 on the Australian Stock Exchange, and traded at A$26.27 at 10:10 a.m. Sydney time.

`Customer Demand'

The record results ``reflects the increased production from the recently expanded Western Australia iron ore operations in response to continuing strong customer demand,'' the company said in a statement to the Australian Stock Exchange.

Iron ore prices will rise 9.5 percent to a record in 2007, a fifth straight year of gains. Iron ore and other steel making materials were the second-largest contributor to BHP's earnings. The company is the world's largest producer of coal for the steel industry and third-biggest iron ore exporter.

Production of manganese ore, used to harden steel, rose 20 percent to a record 1.5 million tons, it said. Coking coal, also used in the making of steel, was little changed at 8.97 million tons.

Copper output was little changed at 300,700 tons in the three months ended Dec. 31, from 300,400 tons a year ago. Nickel output fell 1 percent from a quarter ago. Copper and other base metals were the largest profit contributor to BHP last year.

The expansion cost of the Alumar refinery, in which it has a 36 percent stake, has increased because of rises in construction, electrical and labor costs, BHP said. Its share of the project will now be $725 million, up from $518 million. The project will likely start in the second-quarter of 2009, delayed from the middle of 2008.