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Improved 1H14 Production for BHP Billiton

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Mining giant, BHP Billiton Limited (BHP), reported improved year-over-year operating performance for the first half of fiscal 2014. The company witnessed a rise in production of copper, iron ore, metallurgical coal, alumina, aluminium, manganese alloy and nickel. However, production of petroleum products and energy coal declined.

Copper production for the reported half year increased 6% year over year to 843 thousand tonnes. The increase was mainly led by a strong contribution from the Escondida copper production facility. BHP Billiton expects to produce roughly 1.2 million tonnes of copper in fiscal 2014.

The company’s Western Australia Iron Ore (:WAIO) operations attained a record production of 108 million tonnes in the reported half year. The high production was supported by an early start to production from Jimblebar mine.

Higher zinc grades at Cannington boosted total zinc production by 18% to roughly 61,410 tonnes. However, production of natural gas declined 7% year over year in the reported period. Maintenance work at Olympic Dam reduced the production of uranium by 3% year over year.

Of the ongoing 16 projects, six delivered their first production, while the remaining 10 are on track. The Cerrejon P40 (Colombia) and WAIO Port Blending and Rail Yard Facilities projects delivered their first production in the quarter ended Dec 2013.

Additionally, the company plans to replace two shiploaders at WAIO’s Nelson Point operations in Port Hedland, with an approved investment of $301 million. The shiploaders will be commissioned in the second half of 2014.

Such operating performance gives the company a good start to fiscal 2014. BHP Billiton has various ongoing projects, some of which are expected to start production in fiscal 2014. We, thus, expect to see improved year-over-year results for the company in the coming quarters.  

However, the Nickel West Leinster Perseverance Underground mine experienced a seismic event on Oct 31, 2013, following which a feasibility study was conducted for production continuity at the mine. Production has currently been suspended at the mine and further production will start at the Rocky’s Reward open cut mine, near Leinster, as an alternative. This production suspension will hamper the production of nickel in the second quarter of fiscal 2014.

With a market capitalization of $176.4 billion, BHP Billiton has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Stillwater Mining Co. (SWC), General Moly, Inc. (GMO) and Denison Mines Corp. (DNN). While Stillwater Mining and General Moly hold a Zacks Rank #1 (Strong Buy), Denison Mines carries a Zacks Rank #2 (Buy).

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