BHP will Miss its Production Target

BHP Billiton (BHP) has missed its production target for the fourth quarter which the company forecasted earlier and also said that its coal sales were being held back by infrastructure constraints in eastern Australia. The company said sales from its Queensland coal operation were being hit by limited rail and port capacity. BHP also said that the third party infrastructure constrains were hitting its Hunter Valley Coal export sales. In the current situation, were the prices are high, failure to maximise sales because of third party limitations frustrates the mining companies.

UBS analysts led by Glyn Lawcock said “Overall, we see potential for downside risk to achieving the market's production expectations as BHP has provided little commentary or guidance ahead of the report during a time of diminished demand from customers”. DJ Carmichael analyst James Wilson said “BHP should probably weather the storm a little bit better than Rio Tinto because they are a lot more diversified”.

In the second quarter of last year the output of energy coal fell by 4 per cent to 19.6m tonnes, mainly due to scheduled maintenance and poor geological conditions in the US. BHP Billiton’s petroleum products output for the quarter were flat at 30.3m barrels of oil equivalent. Its oil reserves are in decline but this is being compensated for by higher gas production. Alumina and aluminium production remained close to record levels. Copper output was 23 per cent up on the previous year, reflecting the build-up in Chile. But longer leaching times, unplanned maintenance and lower grades pulled it down 10 per cent on the June quarter.

BHP Billiton’s shares closed up 41p at 18.05, in line with its peers in the mining sector. BHP also revealed that during the quarter it had spent $143m on mining exploration, including diamond targets in Angola and Democratic Republic of Congo, and $124m on oil and gas exploration.