BHP Billiton is poised to post a fresh first-half profit record after reporting a surge in iron ore production at its Pilbara mines in Western Australia to new heights.
The mining giant on Wednesday said iron ore production for the half year to December 31 totalled 80.6 million tonnes (Mt), up 23 per cent compared to the same period in 2010.
BHP Billiton said its iron ore mines in the Pilbara region set a production record in the December quarter, hitting an annualised output rate of 178 Mt and beating analyst estimates.
The miner says it now expects to marginally exceed its full-year iron ore production forecast of 159 Mt.
Options Xpress market analyst Ben Le Brun said BHP Billiton appeared on track to surpass its annual output guidance for the bulk commodity.
Mr Le Brun said naysayers had started to predict profit warnings from BHP Billiton, Rio Tinto and Fortescue Metals Group because of lower prices for iron ore.
Iron ore represents about 40 per cent of BHP Billiton’s earnings, about 60 per cent for Rio Tinto, and 100 per cent for Fortescue.
“But they’ve managed to ramp up production, all three of them, and it looks like it (profit warnings) might not be coming and we’re on track for another record year for these companies,” Mr Le Brun told AAP.
BHP Billiton, which is expanding its Pilbara iron ore production capacity to more than 220 Mtpa by 2014, last year posted a 71.5 per cent leap in its half year result to a record $US10.524 billion ($A10.17 billion).
When the company lodges its latest interim financial results on February 8, analysts expect increased iron ore production volumes will offset softer prices.
Notable in the production report on Wednesday was a jump in total petroleum output during the six months to December 31 to 109.4 million barrels of oil equivalent, up 36 per cent on the same period in 2010.
The increase was due to the acquisition of the Fayetteville and Petrohawk shale gas interests in the United States and strong performances from existing assets, BHP Billiton said.
While the production report was widely well received, there were weak spots.
Base metals production was lower – by 33 per cent for zinc – compared to the previous corresponding half year.
BHP Billiton also warned that its Nickel West operating margins remained sensitive to persistent weakness in nickel prices and the continued strength of the Australian dollar.
Its integrated aluminium business also suffered from weaker prices, as well as underlying cost pressures.
Mr Le Brun said BHP Billiton still had much of its acquisition warchest to spend and would likely pick up more shale gas assets.
He also said he expected funds from the sale of the EKATI diamond mine in Canada would add to capital growth, rather than being distributed to shareholders.
The sale process was ongoing and could continue through the first half of the 2012 calendar year, BHP Billiton said.
Shares in the company closed up 30 cents at $37.00.