BHP iron ore and manganese output rise to records

BHP Billiton, the world’s biggest mining company, said Thursday that second-quarter iron ore and manganese output rose to records to meet rising demand from steelmakers in China and Japan.

Iron ore production rose 11 percent to 25.4 million tons in the three months ended Dec. 31, from 22.9 million tons a year earlier, BHP said in a statement.

China’s iron ore imports may rise 10 percent this year as the world’s fastest- growing major economy makes more steel to meet rising demand for houses, autos and home appliances. BHP said the expansion costs of an alumina refinery in Brazil and an oil project in the Gulf of Mexico jumped as mining companies face higher bills to complete projects to drive output gains.

“We’re approaching peak production rates,” said Atul Lele, a fund manager at White Funds Management, in Sydney. “But they continue to face costs pressures on their projects.”

The record results reflect “increased production from the recently expanded Western Australia iron ore operations in response to continuing strong customer demand,” the company said in a statement to the exchange.

Iron ore prices will rise 9.5 percent to a record in 2007, a fifth consecutive year of gains. Iron ore and other steel making materials were the second-largest contributor to BHP’s earnings. The company is the world’s largest producer of coal for the steel industry and third- biggest iron ore exporter.

Production of manganese ore, used to harden steel, rose 20 percent to a record 1.5 million tons, it said. Coking coal, also used in the making of steel, was little changed at 8.97 million tons.

Alumina production rose 14 percent to 1.2 million tons, and aluminum metal output rose 1 percent to 338,000 tons in the quarter to all-time highs. Demand for aluminum may increase 6.3 percent this year, fueled by China, the world’s largest consumer of the metal, according to New York-based Prudential Equity Group Inc.

Copper output was little changed at 300,700 tons in the three months ended Dec. 31, from 300,400 tons a year ago, the company said. Nickel output fell 1 percent from a quarter ago. Copper and other base metals were the largest profit contributor to BHP last year.

Earnings will be cut by $220 million for the six months ended Dec. 31, after final provisional pricing adjustments to copper sales and prices for the period, BHP said today. Cash prices of copper in London fell 15 percent in the half.

Analysts will have factored in the declining copper prices in their forecasts for BHP earnings, said Mark Pervan, head of research at Daiwa Securities in Melbourne.

BHP is expected to post a record annual profit of $13.1 billion for the year ending June 30, according to analysts estimates compiled by Bloomberg, up from $10.45 billion a year ago.

Production of zinc, lead and silver fell as output was curbed at its Cannington mine in Australia, to rebuild ground support, BHP said.

Its oil and gas production were little changed as it was able to offset depleting fields with improvement from others.

The expansion cost of the Alumar refinery, in which it has a 36 percent stake, has increased because of higher construction, electrical and labor costs, BHP said in a separate statement. Its share of the project will be $725 million, up from $518 million. The project will probably start in the second-quarter of 2009, delayed from the middle of 2008.

The delayed Atlantis South oil project in the United States will cost about 50 percent more than estimated, the company said. Its share of the cost at the Gulf of Mexico project has increased to $1.5 billion, from $1 billion, it said. In November, BHP increased the cost of the Ravensthorpe nickel project in Australia by 64 percent to $2.2 billion.

“The costs increases are a bit disappointing, and shows they’re not out of the woods yet on costs blowouts,” said Rob Clifford, an analyst at ABN AMRO Holding, in Melbourne.

3 compete for mining firm

Arcelor Mittal, the world’s biggest steelmaker, BHP Billiton and Rio Tinto Group are competing to buy a stake in the Indian iron ore mine company Sesa Goa worth about $820 million, two people familiar with the situation said.

Japan’s Mitsui is selling its 51 percent holding in Sesa Goa and may make an announcement on Monday when the board of the Panaji, Goa company meets to approve third-quarter earnings, said the people, who did not want to be identified. JSW Steel, India’s fourth-biggest producer, is also bidding for the stake, its managing director, Sajjan Jindal, said.

Mittal and Posco plan to spend $21 billion over the next seven years in India to tap rising demand and the world’s fifth-largest iron ore reserves.

Source: www.iht.com