BHP Second-Quarter Iron Ore Output Rises 16% as Prices Tumble

BHP Billiton Ltd. (BHP)s second-quarter iron ore output gained 16 percent as the worlds biggest mining company continued to raise production amid a price slump.

Output of the steelmaking raw material rose to 56.4 million metric tons in the three months ended Dec. 31 from about 48.7 million tons a year earlier, Melbourne-based BHP said today in a statement. That missed the 58 million ton median estimate of three analysts surveyed by Bloomberg. Petroleum production rose to 63.6 million barrels of oil equivalent, beating a median forecast of five analysts of 61.8 million barrels.

We are reducing costs and improving both operating and capital productivity across the group faster than originally planned, Chief Executive Officer Andrew Mackenzie said in the statement.

The largest iron ore suppliers, led by Vale SA (VALE5) and Rio Tinto Group, are raising output even as weaker growth crimps demand in China. While the producers forecast higher cost competitors will curb output, UBS AG and Goldman Sachs Group Inc. estimate that the global surplus will grow on supply additions from Australia and Brazil.

BHP, the biggest overseas investor in U.S. shale, plans to cut the number of active rigs in its U.S. shale unit by 40 percent by July in response to falling oil prices, Mackenzie said in the statement.

Though iron ore and oil prices are lower, BHPs cash flow is sufficient to cover planned increases to its dividend, Morgan Stanley analysts led by Brendan Fitzpatrick wrote in a Jan. 20 note. It is some years before sufficient cash would be accumulated on the balance sheet to make additional returns, the analysts wrote.

To contact the reporter on this story: David Stringer in Melbourne at dstringer3@bloomberg.net

To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net Indranil Ghosh, Andrew Hobbs

Press spacebar to pause and continue. Press esc to stop.

Originally posted here:
BHP Second-Quarter Iron Ore Output Rises 16% as Prices Tumble