BHP sees no sign of China slowdown

[miningmx.com] — BHP Billiton, the world’s biggest mining company, forecast record iron ore production this year after quarterly output jumped by a fifth, shrugging off predictions that growth in top buyer China will slow.

China is the largest market for the vast volumes of the steel-making commodity as well as for copper, coal and other industrial minerals that BHP Billiton and rival Rio Tinto mine worldwide.

Data this week showed the world’s second-largest economy grew at its weakest pace in 2-1/2 years in the fourth quarter and appeared headed for a sharper slowdown in the coming months, raising concerns over demand from Chinese steel mills.

“These companies are pretty ‘gung ho’ on iron ore and I don’t think they would be out there crazily expanding if they thought there was a chance the volumes might not find a home,” said Mark Taylor an analyst for Morningstar in Sydney.

BHP Billiton’s report on Wednesday, which precedes its quarterly financial results due on Feb 8, showed a 22% rise in December-quarter iron ore output from a year earlier, roughly in line with expectations.

Only Brazil’s Vale and Rio Tinto mine more iron ore each quarter, but BHP Billiton’s production growth is running at about 10 times the rate of Rio Tinto.

BHP Billiton is starting from a lower base than its bigger rivals and has earmarked a large chunk of its five-year, $80bn capital spending programme to mine more ore, sharing its rivals’ confidence in long-term Chinese demand.

“Full year production is now forecast to marginally exceed prior guidance of 159 million tonnes per annum,” BHP Billiton said in its December-quarter production report.

Rio Tinto on Tuesday reported near-flat production growth in iron ore for the fourth quarter, but it is still hitting fresh record production rates.

Australia’s third-largest iron ore miner, Fortescue Metals Group, this week unveiled plans to spend $8.4bn to almost triple production to 155 million tonnes a year by mid-2013 from 55 million now, after the company reported a 19% rise in December-quarter iron ore output.

RAINING CASH

Record iron ore volumes are helping to flood big miners with cash.

Based on analysts’ forecasts, Rio Tinto is expected to report full-year 2011 earnings before interest and tax (EBIT) of around $23bn, up from $21.1bn a year ago.

BHP Billiton is tipped to show flat EBIT of $32bn year-on-year for the year to June 30.

BHP Billiton, which also operates the world’s biggest coking coal collieries in partnership with Mitsubishi Corp in northeastern Australia, posted a 9% rise in output in the December quarter from a year earlier. Coking coal is used to fuel furnaces in steel mills.

The company’s copper output dropped 7% over the period to 280,300 tonnes, which included lower yields from its majority-owned Escondida mine in Chile, though that was slightly ahead of a UBS forecast of 265,000 tonnes.

Over the September quarter, copper production leapt 27%, as a strike at Escondida ended and the company’s Olympic Dam mine in Australia yielded more metal.

Escondida’s production is forecast to be marginally lower in 2011-12, but pick up after that as mining expands.

BHP Billiton, the world’s second-largest copper producer after Chile’s Codelco, also booked a near 700% increase in mineral resource tonnage at its Spence copper mine in Chile.

BHP Billiton shares were barely changed in morning trade.