BHP Billiton production grows in 2015, only iron ore to expand in 2016
After a record production year in 2015, mining giant BHP Billiton has trimmed its production guidance for 2016 in the face of waning prices and warned its underlying profits will be hit by a charge of between $350m to $650m from impairments and redundancies at its copper business.
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The Anglo-Australian group's quarterly production update revealed group production increased 9% in the year to 30 June, thanks to gains from oil, iron ore and metallurgial coal, with the only fall a 1% decline in copper production.
Iron ore stood out, with production increased by 14% to a record 233m tonnes, exceeding full-year guidance.
For 2016 the company's guidance is for production growth only within the Western Australian iron ore business, with a 6% increase pencilled in thanks solely to productivity improvements, while petroleum production is guided down 7%, copper by 12% and metallurgical coal down 6%.
A week after writing down the value of its US shale assets by $2bn, BHP said its spinning off of non-core assets into the new South 32 vehicle would lead to a $2.1bn post-tax loss that will be recognised as an exceptional item.
Chief executive Andrew Mackenzie said: "Our businesses performed well over the 2015 financial year. We have improved the performance of our equipment, reduced costs, and increased volumes despite a significant reduction in capital spend."
He said BHP's simpler portfolio following the demerger of South32 will help it keep up the pace of operational improvements to help support cash generation, margins and returns.
Speaking on the iron ore business, he said productivity improvements will be the sole source of volume growth in the 2016 financial year, with production forecast to increase by seven per cent and unit costs are expected to fall to US$16 per tonne.
"In petroleum, through improved recoveries and lower drilling costs, we expect to maintain production in the Black Hawk and Permian in the 2016 financial year despite cutting annual shale investment by over 50%. Although our decision to cut spending in the Onshore US will mean deferring gas volumes in the near term, we expect to realise greater value by developing our acreage later."