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BHP Billiton (BHP) Reports 8% Rise in Annual Production

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BHP Billiton Limited BHP clocked an increase of 8% in annual production in fiscal 2018 and record output at Western Australia Iron Ore, Queensland Coal, and Spence copper mine in Chile.


Iron ore production for the fiscal 2018 rose 3% to a record 238 Mt (or 275 Mt on a 100% basis). Record annualized production rate reflects increased productivity across the supply chain following completion of the rail reliability project and improved car dumper performance. Record production was reported at Jimblebar and Newman. The company anticipates production of between 241 and 250 Mt at WAIO (between 273 and 283 Mt on a 100% basis) for the 2019 financial year.


For 2018 financial year, copper production surged 32% to 1,753 kilotons (kt) with higher volumes at Escondida supported by the ramp-up of the Los Colorados Extension project. Total copper production of between 1,675 and 1,770 kt is projected for 2019 financial year.


Metallurgical coal production for the 2018 financial year was up 7% to a record 43 Mt. At Queensland Coal, record production for the 2018 financial year was supported by record stripping performance, increased truck hours and higher wash-plant utilization from low-cost debottlenecking activities. Production records were achieved at Peak Downs, Saraji, Caval Ridge, South Walker Creek and Poitrel. Production is anticipated to increase to between 43 and 46 Mt in the 2019 financial year.


Updates on Major Projects


In June, BHP Billiton had announced that its board has approved capital investment of $2.9 billion in the South Flank project in central Pilbara, Western Australia. The project will replace production from the 80 million ton per annum (Mtpa) Yandi mine when it reaches the end of its economic life. It is due to become operational by 2021 and expected to produce ore for more than 25 years.


Further, an increase of $122 million in the budget of the Jansen project to $2.7 billion has been incorporated to fund support services at the site as work continues on completion of the shafts. The forecast for the North West Shelf Greater Western Flank-B project has been trimmed by $98 million to US$216 million as the project is tracking ahead of schedule. As of end of the 2018 financial year, the company had five major projects under development in petroleum, copper, iron ore and potash, with a total budget of $10.6 billion over the life of the projects.


Samarco Update


On Jun 25, Samarco and parent companies, VALE S.A VALE and BHP Billiton signed a deal with Brazilian authorities settling a 20 billion reais ($5.30 billion) lawsuit related to a 2015 dam burst that killed 19 people. The mining giant expects to record a charge of $650 million in its second half fiscal 2018 results related to the damage.


Further, it projects to record exploration expense (including petroleum and minerals exploration programs) of $448 million in the second-half results.

BHP Billiton is also simplifying its portfolio and agreed to sell its smallest copper mine — Cerro Colorado in Chile to private equity manager, EMR Capital, for as much as $320 million. Cerro Colorado is one of two copper mining operations of BHP Billiton’s Pampa Norte division and is located in the Atacama Desert in northern Chile. The company had been searching for a buyer for the mine for almost a year.


The sale is expected to close during the fourth quarter of calendar year 2018, pursuant to fulfillment of customary closing conditions. On closure, the company will receive a total cash consideration of $230 million plus around $40 million from the sale of certain Cerro Colorado copper inventory. It will also receive a contingent payment of up to $50 million in the future, depending upon copper price performance.



Over the last year, BHP Billiton’s shares yielded a return of 23.6%, outperforming 14.6% gain recorded by the industry. The company is gaining competency on the back of sturdier productivity and remains on track to deleverage balance sheet over time. It is making operations more efficient on the back of smarter technology adoption across the entire value chain along with reducing capital and exploration expenses.


BHP Billiton currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.


Other Stocks to Consider


Some other top-ranked stocks in the same industry are listed below:


Allegheny Technologies Incorporated ATI delivered an average positive earnings surprise of 38.69% in the last four quarters. Its shares have appreciated 52% in a year’s time. The company sports a Zacks Rank #1. 


Ingevity Corporation NGVT carries a Zacks Rank of #2 (Buy). The company recorded an average positive earnings surprise of 20.15% in the trailing four quarters. Its shares have surged 56% over the past year.


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