MENU

What you need to know from BHP Billiton Limited’s 3Q production report

BHP Billiton Limited (ASX: BHP) has this morning released a set of impressive results for its third quarter operations which included record production across four commodities as well as an upgraded full-year guidance for both iron ore and metallurgical coal.

Iron Ore & Coal

Aided by a mild wet season, a strong operating performance and a continued ramp-up of production at its Jimblebar mine, the miner was able to increase total exports by 23% to 57.6 million tonnes for the latest quarter. It also increased its full-year production guidance from 212 million tonnes to 217 million tonnes. BHP has now increased guidance by a total of 10 million tonnes during the course of the year so far.

Record production at all Queensland Coal operations and a successful ramp-up at its Daunia mine also saw the miner increase its guidance for metallurgical coal (also used in steel production) for the year. Having increased production of the commodity for the nine months by 24% to 33 million tonnes, the miner is on track to produce 43.5 million tonnes for the year, which is 2.5 million tonnes or 6.1% above its previous guidance.

Energy coal production remained almost unchanged compared to the prior corresponding period at 55 million tonnes.

Copper, Petroleum & Potash

The full-year guidance of 1.7 million tonnes for copper remained unchanged while guidance for petroleum production was rebased at 245 million barrels of oil equivalent (MMboe) following the successful divestment of Liverpool Bay.

While iron ore, coal, copper and petroleum form the company’s “four pillars”, fertiliser ingredient potash could well become its fifth. However, the company has advised that its investment in its Canadian Jansen project will be scaled back this year by 25% to US$600 million in an attempt to time the development to meet strong market demand anticipated in the decade beyond 2020.

What does this mean for Foolish investors?

The impressive set of production results for the nine months to March 31 reflect the focus that the company has had since Andrew Mackenzie’s induction as CEO early last year, which involves heavily reducing operating costs and improving productivity. Although there has been significant pressures on the prices of coal, copper and iron ore, the company appears undeterred as it ramps-up production and focuses instead on the long-term.

Investors in BHP need to take the same long-term perspective. Conditions are likely to remain volatile for some time yet given the commodity prices and softening demand from China which could see shares stumble along the way. However, the future is looking brighter with demand for coal and potash expected to soar over the coming decades while the miner remains bullish on iron ore as well.

BHP’s shares have fallen 0.4% to $37.62 following the report while rivals Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG) have dropped 0.5% and 1% respectively.

The top ASX pick you've never heard of...

Top Motley Fool analysts just identified their #1 ASX pick for 2014, a small-cap stock that could be poised for big gains (and offers a fat, fully franked dividend!). Discover all the details now, including the name and code, in this FREE investment report, "The Motley Fool's Top Stock for 2014."

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

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.