Mining heavyweight BHP Billiton (ASX: BHP) will deliver its production results for the September quarter before the market opens on Tuesday, whereby it is expected that the miner will report strong iron ore output.
The price of the commodity has remained higher than what most analysts had anticipated on the back of strong Chinese demand. Whilst some analysts had expected the commodity to trade for around US$100 per tonne before recovering at the end of the year, it has remained resilient between US$130 per tonne and US$140 per tonne for much of the quarter – up 21% since its low in June.
According to UBS, the company is set to announce shipment of 54 million tonnes of iron ore for the quarter, making its guidance of 207 million tonnes for the 2014 financial year look somewhat “conservative” – although the equity analyst acknowledged that it was too early to tell.
BHP’s key competitor Rio Tinto (ASX: RIO) also posted strong third-quarter results last week which saw its stock price jump 2.5% after it achieved record iron ore production of 68 million tonnes. Shares in Fortescue Metals Group (ASX: FMG) also jumped following its results, despite increasing its exports by less than expected.
BHP’s shares were trading 1.4% higher on Monday afternoon and should receive a boost on Tuesday, provided that its production rate meets forecasts.
Although the results are certainly positive for the miners, the volatility within the sector remains high, and the risks of investing still outweigh the potential benefits. As such, it would be wise to remain on the sidelines and wait for a more attractive entry point.
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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.