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BHP Billiton Limited disappoints as full-year iron ore guidance maintained

Although mining heavyweight BHP Billiton Limited (ASX: BHP) today announced record volumes of coal and iron ore for the December 2013 half year, shareholders were left disappointed as iron ore production narrowly missed market expectations.

The market had been anticipating 49.4 million tonnes for the December quarter, but the miner only achieved 48.9 million tonnes (which was up 16% on the year). While still a strong effort, investors had been hoping for a stronger-than-anticipated result which may have led to upgraded full-year production guidance, as was delivered by rival Rio Tinto Limited (ASX: RIO) when they reported last week. Instead, BHP maintained its guidance of 212 million metric tonnes for the 2014 financial year due to “the general uncertainty that exists as we enter the wet season.”

A 6% increase in copper production to 843,000 tonnes was achieved compared to the prior corresponding period, while petroleum liquids production also increased by 9% to 50 million barrels of oil equivalent, underpinned by a 72% increase at Onshore US. Full-year production guidance was also maintained for their petroleum, copper and coal businesses.

Pleasingly, BHP continued to recognise improvements in its productivity levels throughout the period, which the company said was particularly evident in its Queensland Coal business, running at an annualised rate of 68 million tonnes for the quarter.

Here are some of the other highlights from Wednesday’s half-year operational review:

  • Western Australia Iron Ore (WAIO) achieved record production of 108 million tonnes (100% basis) – which was bolstered by the ahead-of-schedule first production from the Jimblebar mine
  • Queensland Coal achieved record production of 68 million tonnes
  • Two major projects delivered first production in the December 2013 quarter – all other projects are on schedule and budget
  • The miner’s share of capital and exploration expenditure for financial-year 2014 is expected to be US$16.1 billion
  • Strong momentum for productivity agenda going into the second half of the financial year

Following the news, BHP’s shares fell 1.8%, while fellow miners Rio Tinto and Fortescue Metals Group Limited (ASX: FMG) are down 1.7% and 2.7% respectively.

Foolish takeaway

Although BHP narrowly missed its production target for iron ore, the miner continues to improve its position moving forward by cutting costs, improving productivity and simplifying its balance sheet by divesting non-core assets. The miner also maintains much more diversified operations than its peers, making it a much safer bet going forward.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

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