Wednesday 19 October 2016 8:11 am

BHP laments South Australia blackouts but insists group production is in line with forecasts

Mining giant BHP Billiton (BHP) has warned that production at its Olympic Dam copper mine was under review after the South Australia project was hit by power blackouts.

Reporting on its third quarter operational performance, BHP said that despite this hiccup, group production and unit cost guidance remained unchanged for the 2017 financial year.

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The Olympic Dam mine was shut for nearly two weeks after a state-wide power outage – it is estimated to have lost approximately AU$2.6m (£1.6m) per day during this time. It had been expected to produce 200,000 tonnes or about 12 per cent of BHP's forecast copper output for the year to June 2017.

"The loss of power in the state is not something that you think could happen, certainly in Australia," said Jacqui McGill, the boss of the Olympic Dam, in an interview with Reuters.

BHP chief exec Andrew Mackenzie remained positive on the wider group's results: "Full year production and unit cost guidance remains unchanged." 

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The group also has four major development projects in petroleum, copper and potash and it confirmed that all were progressing on time and within the total budget of $6.9bn. 

Furthermore, Mackenzie was confident that future commodity pricing would swing in the group's favour:

We have seen early signs of markets re-balancing. Fundamentals suggest both oil and gas markets will improve over the next 12 to 18 months. Iron ore and metallurgical coal prices have been stronger than expected, although we continue to expect supply to grow more quickly than demand in the near term.

Together, the combination of steadier markets, continued capital discipline, improved productivity and increased volumes in copper, iron ore and metallurgical coal should further support strong free cash flow generation this financial year.