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Samarco disaster to cut BHP Billiton iron-ore output

Samarco disaster to cut BHP Billiton iron-ore output

Photo by Reuters

20th January 2016

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

  

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PERTH (miningweekly.com) – Global mining giant BHP Billiton has cut its iron-ore production expectations for the 2016 financial year by 10-million tonnes, to 237-million tonnes, following the suspension of operations at its Samarco joint venture, in Brazil.

Operations at Samarco were suspended in November following a tailings spill that claimed the lives of 17 people and left hundreds homeless.

The mining major said on Wednesday that following a strong December half-year, it had maintained its full-year production guidance for its petroleum, copper and coal assets.

“Our operated assets continued to perform well over the last six months. The strong performance of our conventional petroleum assets has offset lower shale volumes following a reduction in investment to preserve the value of our acreage in current market conditions,” said BHP CEO Andrew Mackenzie.

“Increased throughput at Escondida helped mitigate the impact of expected grade decline and better productivity supported production at Queensland Coal. These efforts have allowed us to maintain production guidance for petroleum, copper, coal and Western Australian iron-ore.”

During the six months to December, BHP produced 118-million tonnes of iron-ore, which was a 4% increase on the previous corresponding period.

Production from the Western Australian iron-ore assets increased by 6% over this period, to a record 131-million tonnes, underpinned by the Jimblebar mining hub operating at full capacity, as well as improved ore handling plant use at the Newman operation.

Production from Samarco for the December half decreased by 25% to 11-million tonnes, and mining and processing operations at the mine remained suspended.

Meanwhile, petroleum production for the first half decreased by 5% on the previous corresponding period, to 125-million barrels of oil equivalent, as crude oil, condensate and natural gas liquids production fell by 3%.

Onshore US liquids volumes for the December 2015 half-year rose by 8% to 26.3-million barrels of oil equivalent, underpinned by an increase in liquids production from the Black Hawk and Permian of 9% and 78%, respectively.

However, BHP noted that a reduction in capital spend of about 25% also contributed to a 3% decline in liquids production from the Black Hawk and Permian assets during the December quarter, relative to the September quarter.

Given a further reduction in development activity, BHP expected liquids volumes from these liquids-rich fields to show a modest year-on-year decline.

Copper production for the first half of 2016 was down 6% on the previous corresponding period, to 762 000 t, as continued strong operating performance across the business was offset by grade declines at the Escondida mine, in Chile.

Copper production from Escondida decreased by 18% during the six months to December, with the mine producing 452 000 t of copper, despite record volumes of material mined.

Production from the Olympic Dam mine, in South Australia, increased by 37% from the previous corresponding period, to a record 112 000 t, reflecting the record ore milled and improved smelter use following planned maintenance in the previous period. Copper grades also increased by 35% in the December quarter, in line with the mine plan.

Meanwhile, metallurgical coal and energy coal production for the half-year decreased by 3% on the previous corresponding period, with BHP producing 21-million tonnes of metallurgical coal and 19-million tonnes of energy coal.

Queensland coal production declined in the December half-year as record production at the Blackwater, Daunia, Caval Ridge and South Walker Creek mines was offset by a convergence event at the Broadmeadow mine and the completion of longwall mining at the Crinum mine.

The Crinum mine would be transitioned to care and maintenance in the March quarter.

Furthermore, the lower energy coal production for the December half reflected a continued drought at the Cerrejon operation, in Colombia, and the impact of heavy rainfall in New South Wales. A 16% increase in Navajo coal volumes, owing to higher customer demand, was offset by lower customer requirements for the San Juan product.

“Commodity prices fell substantially in the first half of the 2016 financial year putting pressure on the whole resources sector. We continue to cut costs and remain focused on safely improving our operational performance to enhance the resilience of our business,” Mackenzie said on Wednesday.

“In this environment, we are also committed to protecting our strong balance sheet so we have the financial flexibility to manage further volatility and take advantage of the expected recovery in copper and oil over the medium term.”

At the end of December 2015, BHP Billiton had four major projects under development in petroleum, copper and potash, with a combined budget of $6.9-billion over the life of the projects.

Edited by Mariaan Webb
Creamer Media Senior Deputy Editor Online

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