BHP Billiton cuts iron ore guidance for 2016 but says productivity is improving

 
James Nickerson
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BHP Billiton said it is focussing on productivity (Source: Getty)

BHP Billiton followed in the footsteps of Rio Tinto by cutting its iron ore production guidance.

The figures

BHP Billiton cut its annual production guidance of iron ore by four per cent, or 10m tonnes.

The company produced 53m tonnes of iron ore at its Western Australia iron ore (WAIO) operations in the three months to the end of March, a 10 per cent fall from a year ago.

Petroleum production fell by four per cent in the three month period compared to the same period in 2015, while Copper production dropped eight per cent.

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Why it's interesting

BHP Billiton cut its production guidance because of "adverse weather conditions and the initiation of an accelerated rail network maintenance progam".

Those weather conditions refer to Cyclone Stan, which hit Australia in January (and also had an impact on Rio Tinto).

So production is now expected to be 260m tonnes, four per cent prior gudiance (or 10m tonnes less).

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Yesterday Rio Tinto cut its 2017 iron ore guidance due to the delay of its driverless train system, AutoHaul.

Full year guidance for petroleum, copper and coal was unchanged by BHP Billiton.

But BHP Billiton says that it will be focussing on productivity, and has taken steps to strengthen, including asset sales and the deferral of investment.

Read more: Rio Tinto lowers 2017 iron ore guidance

"While these measures will reduce our output this year, they have increased our focus on our highest-quality operations and will support stronger margins and returns," chief executive Andrew Mackenzie said.

The miner said it is on track to deliver an average unit cost improvement of 14 per cent across major assets.

Mackenzie added that the rail renewal and maintenance programme, along with improvements at the Jimblebar mining hub, will deliver an increase in iron ore capacity to 290m tonnes over time.

What BHP Billiton said

Chief executive Andrew Mackenzie said:

We have the potential to significantly grow the value of our company. Our simpler organisational structure will promote greater efficiency, rapid sharing of best practice and adoption of new technology to deliver the next level of safe productivity.

Debottlenecking our assets at very low cost will generate high returns and substantial value. We have a pipeline of projects in copper and oil that allow us to bring high-margin volumes to market when teh time is right. And as others cut back on exploration, our investment will go further and help create new options for the future.

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