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BHP Billiton disappoints analysts
According to Business Report, Merrill Lynch had cut back on its estimate of BHP Billiton's 2006 net profit as a result of disappointing first-quarter production results. It is expected that the company's net profit might reach USD9 billion, which is USD2 billion less than their earlier estimate of USD9.2 billion. Analysts were generally disappointed with the group's output for iron ore, coking coal, alumina, nickel, copper and diamonds.
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BHPBill -- development update
During the quarter, cost reviews were completed for the Ravensthorpe and Yabulu projects (both Australia). Due to the impact of demand driven tightness in the Australian labour market, rising input costs and a weakening US dollar, an increased capital budget for both of these projects has been approved. Since last reporting, Escondida Norte (Chile) has been successfully commissioned on schedule. Development costs are being finalised, however it is expected the final cost will be below budget in local currency and marginally above budget in US dollars due to the strengthening of the Chilean peso. During October 2005, the Rapid Growth Project 3 expansion at Western Australia Iron Ore and the Samarco (Brazil) expansion received board approval. These projects will be included in the December 2005 Exploration and Development report.
Petroleum development
Atlantis South Development, Gulf of Mexico, USA (BHPBill 44%, non-operated)
In February 2005, BHPBill approved a revised budget of USD1.1 billion for the development of the Atlantis South oil and gas reserves. The Atlantis South development will have a gross nameplate daily capacity of 200 000 barrels of oil and 180 million cubic feet of natural gas.
North West Shelf expansion, Australia (BHPBill 16.67%, non-operated)
In June 2005, BHPBill approved an expansion to the liquefied natural gas (LNG) processing facilities at the North West Shelf Project in Western Australia. Engineering and procurement activities are continuing whilst site preparations and the installation of temporary facilities have commenced. BHP Bill's share of development costs, based on the operator's estimate, is approximately USD250 million. First production is expected by late 2008.
Neptune Development, Gulf of Mexico, USA (BHPBill 35%, operated)
In June 2005, BHPBill approved the Neptune oil and gas development in the Gulf of Mexico. The facility will have a gross nameplate daily capacity of 50 000 barrels of oil and 50 million cubic feet of gas per day. Development costs are estimated at USD850 million (BHPBill share USD300 million) with first production expected by the end of 2007.
Minerals development
Aluminium
Worsley Development Capital Projects (DCP), Australia (BHPBill 86%)
The Worsley Alumina DCP were approved in May 2004 with a budget of USD192 million (USD165 million BHPBill share). The projects will increase alumina capacity by 250 000 tonnes per annum (215 000 tonnes per annum BHPBill share) to a capacity of 3.5 million tonnes per annum (3.01 million tonnes per annum BHPBill share). Commissioning of the DCP are scheduled for the first quarter of 2006.
Base Metals
Escondida Norte, Chile (BHPBill 57.5%)
The development of the Escondida Norte pit was approved in June 2003. On 1 October, 2005, Development costs are in the process of being finalised.
Escondida Sulphide Leach, Chile (BHPBill 57.5%)
The Escondida Sulphide Leach Project was approved in April 2004. The project will produce 180 000 tonnes (103 500 tonnes BHPBill share) of copper cathode per annum.
Spence, Chile
The Spence Project, approved in October 2004, will be a new open cut mine with associated plant facilities capable of producing 200 000 tonnes per annum of copper cathode through a combination of chemical and bacterial leaching. A project budget of USD990 million was approved by the board and production is scheduled to begin during the last quarter of 2006.
Carbon Steel Materials
Rapid Growth Project 2, Australia (BHPBill 85%)
The Rapid Growth Project 2 (RGP2) was approved in October 2004. Development costs are estimated at USD575 million (BHPBill share USD489 million).
Stainless Steel Materials
Ravensthorpe Nickel Project, Australia
The Ravensthorpe Nickel Project was approved in March 2004. Following a review of project costs completed in August 2005, a revised budget of USD1.340 million has been approved, 28% above the originally approved budget. The first shipment of MHP remains on schedule for the second quarter of 2007.
Yabulu Extension Project, Australia
The Yabulu Extension Project was approved in March 2004. Following a review of project costs completed in August 2005, a revised budget of USD460 million has been approved, 31% above the originally approved budget. First nickel metal production from the expanded Yabulu refinery is on schedule for the third quarter of 2007.
Petroleum exploration
Exploration and appraisal wells drilled during the quarter or in the process of drilling as at 30 September 2005.
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BHPBill--quarterly production update to 30 Sep 05
Total production of Petroleum Products for the September 2005 quarter of 31.4 million barrels of oil equivalent was higher than the September 2004 quarter. This primarily reflects increased natural gas production. Production was lower than the June 2005 quarter primarily reflecting hurricane related production disruptions in the Gulf of Mexico.
Crude Oil and Condensate -- Production for the September 2005 quarter was in line with the September 2004 quarter. Natural field decline at Bass Strait (Australia) and Typhoon (USA), the sale of our interest in Laminaria (Australia) in January 2005, well downtime at North West Shelf and hurricane damage at Typhoon all led to lower volumes during the quarter. Offsetting this was new production following the commissioning of ROD (Algeria) in October 2004 and Angostura (Trinidad & Tobago) and Mad Dog (USA), both in January 2005.
Natural Gas -- Production for the September 2005 quarter was significantly higher than the September 2004 quarter. This reflects the commissioning of Minerva (Australia) in January 2005, higher production of North West Shelf LNG following the commissioning of the 4th LNG Train in September 2004 and extended shut-downs at Liverpool Bay and Bruce (UK) in the September 2004 quarter.
Alumina -- September 2005 quarter production increased over the September 2004 quarter primarily reflecting increased production at Worsley (Australia).
Copper -- Record quarterly copper production was achieved in the September 2005 quarter. This primarily reflects the inclusion of a full quarter of production from Olympic Dam and record quarterly production at Escondida (Chile), reflecting higher head grades and increased mill throughput. This was partially offset by lower production from Cerro Colorado following an earthquake in June 2005.
Silver -- Decreased production in the September 2005 quarter was driven by lower head grades at Cannington (Australia).
Lead -- September quarter production was in line with both the September 2004 and June 2005 quarters. Uranium Oxide Concentrate - Production of 1 088 tonnes of uranium oxide for the September 2005 quarter reflects the inclusion of a full quarter of production from Olympic Dam.
Iron Ore - September 2005 quarter production increased over the September 2004 quarter reflecting the ramp up of production at Western Australia Iron Ore following the completion of the Accelerated Expansion Project and Rapid Growth Project 1 in June 2004 and December 2004 respectively. Production was lower than the June 2005 quarter reflecting unseasonably wet weather conditions and a train derailment at Western Australia Iron Ore.
Metallurgical Coal -- September 2005 quarter production was lower than the September 2004 quarter. This primarily reflects lower Queensland Coal (Australia) production due to the depletion of reserves at Riverside, a scheduled dragline outage at Saraji and heavy rainfall at South Walker Creek. This was partially offset by increased production at Illawarra Coal (Australia) following the commissioning of Dendrobium in April 2005.
Manganese alloys -- Decreased production in the September 2005 quarter reflects scheduled maintenance at Metalloys (South Africa) and changes to product mix at Temco (Australia).
Diamonds -- Carat production decreased in the September 2005 quarter reflecting the processing of lower grade ore at Ekati (Canada). This is expected to continue for the remainder of the 2006 financial year. Fertilizer - Increased production for the September 2005 quarter reflects the inclusion of a full quarter of production from Southern Cross Fertilizer Operations (Australia) (formerly Queensland Fertilizer Operations).
Energy Coal -- Production for the September 2005 quarter was higher than the September 2004 quarter reflecting record quarterly production at New Mexico Coal (USA) due to favourable geological conditions at San Juan Coal and inventory building in preparation for a dragline outage at Navajo Coal. In addition, record production at Cerrejon Coal (Colombia) reflects the ramp up of recently expanded capacity. Production was higher than the June 2005 quarter and primarily reflects higher production at Ingwe (South Africa) due to ongoing improvement initiatives and response to increased domestic demand, as well as record quarterly production at both New Mexico Coal and Cerrejon Coal.
Nickel -- Record production in the September 2005 quarter primarily reflects the inclusion of a full quarter of production from Nickel West. This was partially offset by lower production at Yabulu (Australia) reflecting maintenance and tie- in activities associated with the Yabulu expansion project. Production at Cerro Matoso (Colombia) in the September 2005 quarter was higher than the September 2004 quarter reflecting improved operating efficiencies, however a major planned maintenance shut down led to lower production compared to the June 2005 quarter.
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BHPBill approves Samarco expansion
BHP Billiton today announced approval of the Samarco Third Pellet Plant project in Brazil. The project will increase annual iron ore pellet production capacity by 7.6 million tonnes to 21.6 million tonnes per annum (100% basis), at a cost of USD590 million (BHP Billiton share). First pellet production is expected in the first half of calendar year 2008.
BHP Billiton's President Iron Ore, Graeme Hunt, said: "This expansion is consistent with our strategy of maintaining our position in growing iron ore markets. Samarco is a low cost supplier of seaborne pellets with a strong customer base. Investment in a third pellet plant will consolidate its strong market position and will enhance BHP Billiton's exposure to the important iron ore pellet market."
Construction on the Third Pellet Plant project will commence immediately and will include:
- Additional mining capacity and a new concentrator at the Germano mine site;
- A second slurry pipeline of approximately 400 kms in length from Germano to Ponta Ubu; and
- A third pellet plant, additional stockyard capacity and enhanced ship loading capacity at the Ponta Ubu site.
BHP Billiton has a 50% interest in Samarco, with the remaining 50% being held by Companhia Vale do Rio Doce (CVRD).
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BHPBill approves Rapid Growth Project 3
BHPBill today announced approval for the Rapid Growth Project 3 (RGP3) which will increase capacity at its Area C iron ore mine in Western Australia by 20 million tonnes per annum (Mtpa) to 42Mtpa. Work on the project will commence immediately, with initial production forecast to begin in the fourth quarter of calendar year 2007. The board has approved capital expenditure of USD1.3 billion for BHPBill's 85% share of the project. This includes approximately USD235 million of sustaining capital required for the replacement of ageing port and rail infrastructure.
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BHPBill -- update on US Gulf of Mexico operations
BHPBill's petroleum exploration and production operations in the US Gulf of Mexico (GoM) have recommenced following Hurricane Rita. After completing necessary inspections, both the Mad Dog and Genesis fields have safely resumed production. The West Cameron 76, Starlifter, Green Canyon 18-Ewing Bank 988, and Green Canyon 60 fields are in various stages of start-up and are expected to resume in the next few days and weeks. This schedule is dependent on the resumption of third-party downstream infrastructure, including pipelines, onshore terminals and other facilities. BHPBill's share of production from the GoM for the 12-month period ended 30 June 2005 was approximately 25 000 barrels of oil equivalent per day (boe/d). As of 10 October 2005 the company's production level had returned to about 40% of this rate. As previously disclosed, the Typhoon facility was heavily damaged by Hurricane Rita. The timing of production resumption from the Typhoon and Boris oil and gas fields is unclear. For the 12-month period ending June 30, 2005, 4.3 million barrels of oil and 7.1 billion cubic feet of natural gas were produced through the Typhoon facility (BHPBill share: equivalent to approximately 15 000 boe/d). In the current financial year, production through Typhoon was expected to be less than 5% of the company's total oil and gas production. The operator of the Typhoon field (Chevron) has formed two teams; an investigation team has been charged with determining why the facility was lost and a restoration team will recommend how best to restore Typhoon-Boris production. It is too early to speculate on the findings and recommendations from either team. The group expects the investigation team to take several weeks and the restoration team to take several months to complete their work. The company holds both property damage and business interruption insurance in relation to the assets in the GoM. The likely recovery from insurance is not known at this stage. Among other activities, the GoM exploration and development drilling operations have resumed. As a result of Hurricanes Katrina and Rita, all well schedules have been delayed by 4 to 6 weeks. The effect that these delays will have on production in future years is difficult to assess at this time. The company does not currently see any impact on the first-oil schedules for its Atlantis or Neptune developments. The Atlantis field is the next BHPBill development to come on-stream. This is still anticipated during the third quarter of 2006. However, flow-on effects from further delays with third-party service providers to other projects or unusually severe marine conditions over the next 12 months cannot be ruled out. For the current financial year, BHPBill's net oil and gas production is likely to be as much as 10 million boe lower than previous guidance. Approximately 4.5 million boe of this is associated with GoM operations, which assumes loss of production from Typhoon for the balance of the fiscal year. Unplanned outages in Australia account for 1.5 million boe of lower production. The balance relates to Production Sharing and Risk Sharing Contracts, whereby increasing oil prices reduce the company's production share.
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BHPBill -- EU closes copper investigations
In May 2003 BHPBill announced that the European Commission (Competition Directorate-General) had served notice on it to submit to an investigation in relation to the copper concentrate market. The group has now been advised that the European Commission has closed its investigation in relation to copper concentrate. No adverse findings have been made in this matter by the Commission. BHPBill was advised in February of this year that the US Department of Justice Anti-Trust Division had also closed its grand jury investigation again, with no adverse findings.
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BHPBill -- new president for Manganese business
BHP Billiton announced today the appointment of Peter Beaven as President Manganese based in Johannesburg. In this role Mr Beaven will be responsible for continuing the optimisation and growth of BHP Billiton's Manganese business. BHP Billiton is the worldÆs largest producer of high-grade manganese ore. Mr Beaven moves into the role following two and half years as Chief Development Officer for the Carbon Steel Materials group based in Melbourne. In his role as Chief Development Officer for Carbon Steel Materials, Mr Beaven was responsible for business development, strategy and project development for the company's iron ore, manganese and coking coal assets. Prior to joining BHP Billiton Mr Beaven was an executive director with global investment bank UBS Warburg, playing a key role in the successful BHP Billiton merger in 2001. Before joining UBS Warburg he was a member of BHP Billiton's Corporate Finance team in the Petroleum and Minerals groups. Mr Beaven will take on his new responsibilities with immediate effect.
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