BHP Iron Ore Output Gains 6% on Mine Expansions

Oct. 20 （Bloomberg） -- BHP Billiton Ltd., the world’s largest mining company, said first-quarter iron-ore production rose 6 percent as it expands mining in Western Australia to meet steel demand.

Output was 32.0 million metric tons in the three months ended Sept. 30, compared with 30.1 million tons a year ago, the Melbourne-based company said today in a statement. Production of petroleum, the company’s third-biggest earning unit, gained 3 percent to a record.

BHP wants to nearly double iron-ore production to 240 million tons a year by 2013 to meet demand from China, the biggest metals consumer. The company said most of its metal mines are operating at full capacity because of strong demand.

“The numbers look pretty good,” said Chris Weston, a Melbourne-based institutional dealer at IG Markets. “The underlying business for the company looks pretty good.”

BHP dropped 1.3 percent to A$40.63 in Sydney at 10:07 a.m. local time compared with a 0.8 percent drop in the benchmark S&P/ASX 200 Index. There are 12 “buy” ratings, four “holds” and zero “sells”， according to Bloomberg data.

“BHP Billiton remains positive on the prospects for many of its core commodities and the underlying performance of its business due to strength in the emerging economies and the ongoing delay in the supply side response,” BHP said in the statement, that also noted uncertainty in developed economies.

Biggest Earner

Sales of iron ore contributed 21 percent of BHP’s revenue in the year ended June 30, according to data compiled by Bloomberg. BHP is spending $4.8 billion on the fifth part of the so-called Rapid Growth Projects that will add 50 million tons. The fourth stage of the expansion program boosted output in the quarter, it said today.

BHP and Rio Tinto Group this week abandoned a joint venture to combine their Pilbara iron ore operations that would have saved them $10 billion.

Metal prices gained 23 percent in the quarter, according to the London Metal Exchange index, a measure of six metals including copper, aluminum and nickel. The cost of 62 percent iron ore delivered to the Chinese port of Tianjin, which fell to a six-month low on July 14, climbed 2 percent during the quarter to $141.40 a ton. It was $152.2 a ton on Oct. 19, according to The Steel Index.

Coal, Petroleum

Iron ore is likely to extend gains through the fourth quarter as Chinese buyers and other consumers restock, UBS AG analysts led by Sydney-based Tom Price wrote in an Oct. 12 report. China’s economy will likely grow 9.9 percent this year from a year earlier, and reach 10 percent in 2011, the Caijing magazine reported this month, citing a study issued by the Chinese Academy of Social Sciences.

Output of coking coal, used to make steel and BHP’s fourth- biggest earning unit, gained 10 percent to 10.3 million tons. Heavy rain during September will cut production in the current quarter, it said today.

Energy coal output was 17.1 million tons, down 5 percent because of expansion works in Australia and bad weather in Colombia. Copper output gained 3 percent to 291,200 metric tons.

Total production of petroleum increased to 43.1 million barrels of oil equivalent. Higher output at the Pyrenees and North West Shelf operations in Australia offset lower production from natural field declines and the deep water drilling moratorium in the Gulf of Mexico. The moratorium was lifted this month.