The Rising Influence of Rising Affluence

[DewDiligence]

BHP Logs Record Iron Production in FY2011; Coal Down from Floods

[BHP just reported its production and exploration results for the FY ending 6/30/11; these documents are http://www.sec.gov/Archives/edgar/data/811809/000119312511191761/d6k.htm and http://www.sec.gov/Archives/edgar/data/811809/000119312511191776/d6k.htm , respectively. BHP will report FY2011 earnings in August.]

http://online.wsj.com/article/SB10001424052702303661904576456960313503484.html

›JULY 20, 2011
By ROBB M. STEWART

MELBOURNE—BHP Billiton Ltd. has paved the way for another year of strong earnings after record production of several commodities including iron ore, although output of metallurgical coal, which is also used to produce steel, continues to be held sharply back by earlier flooding in northeastern Australia.

BHP said Wednesday it achieved an 11th consecutive production record for iron ore, with output up 8% in the year through June 30 at 134.4 million metric tons and 14% higher than a year before in the final quarter. The company shipped ore from its operations in Western Australia state at an annualized rate of 155 million tons a year in the fiscal fourth quarter, it said.

However, metallurgical coal output was 13% lower for the year at 32.7 million tons. BHP said it continues to expect production and sales will be impacted "to some extent" over the remainder of the calendar year by the monsoon rains and flooding that swept Queensland in late 2010 and early this year. Output showed a recovery in the June quarter, up 19% on the prior quarter but down 28% on record volumes in the same quarter last year.

Rio Tinto PLC, the world's second-largest iron ore producer by volume behind Brazil's Vale SA and ahead of BHP, was also hit by the rain and cyclones that battered Australia early in 2011. It said last week iron ore output rose 12% year-to-year in the June quarter and its coal operations were recovering from flooding, but cautioned that while most of its metals and minerals continued to see strong prices, it was also encountering "worsening adverse exchange rates and some input cost pressures."

BHP and Rio are investing billions of dollars expanding mineral production capacity, primarily to feed a growing demand in rapidly industrializing Asia that has helped buoy commodity prices [no kidding].

BHP also is growing its petroleum division, and last week said it would buy Petrohawk Energy Corp. for $12.1 billion to gain large shale assets in Texas and Louisiana in one of the year's largest deals [#msg-65211152].

BHP, one of the world's biggest listed companies, said higher natural gas production following the acquisition earlier in 2011 of the Fayetteville shale assets in the U.S. helped lift petroleum output 6% year-to-year in the June quarter and 1% for the financial year to 159.4 million barrels of oil equivalent. [159.4M boe for the year comes to 437K boe/d; in FY4Q11, the rate was 480K boe/d; this will grow to about 650K boe/d following the HK acquisition.] Excluding the Fayetteville acquisition, BHP said it still expects production to be lower in the 2012 financial year [due to the lingering effect of the GoM moratorium].

"Despite the fact that recovery remains progressive in Queensland Coal, this was an impressive result," Macquarie said in a research note to clients, adding it expected minimal revisions to its full-year earnings forecast.‹