BHP Billiton and Rio Tinto release quarterly production reports this week -- here's what Goldman Sachs is looking for

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BHP Billiton and Rio Tinto, Australia’s “Big Two” diversified miners, will release September quarter production reports later this week — the former on Wednesday, the latter on Thursday.

Both are likely to generate a lot of interest, particularly at a time when commodity prices are enjoying what Macquarie Bank deemed to be a “mini-renaissance” less than a month ago.

Ahead of the reports, Goldman Sachs’ equity research team has released a preview on what it expects both firms to deliver.

Here’s what the bank expects to see from BHP Billiton, along with a table displaying how production levels are likely to compare to prior reporting periods:

We expect to see a solid result QoQ with most commodities performing well, with the exception of its petroleum division. It is likely to see declines in its conventional & onshore business as a result of: (i) 35-day maintenance shutdown at Atlantis in September 2016; (ii) lower capex and development activity in US Onshore; and (iii) divestment of gas business in Pakistan. We also look out for FY17 production guidance update for copper after the power cuts at Olympic Dam in late September.

And here’s the same synopsis for Rio Tinto:

We expect to see a broadly in-line production result. We are looking for an increase in copper with the ramp-up of Kennecott (KUC) which will hit 52mtpa in 1Q17.

Should the forecasts offered from Goldman come to fruition, it says that it makes “no changes to our estimates, ratings, or 12-month target prices for our coverage”.

Goldman has a neutral rating on both BHP Billiton and Rio Tinto, putting a 12-month price target on each of $A20 and $A46 respectively.

On Friday, BHP Billiton and Rio Tinto’s Australian-listed shares closed at $A22.54 and $A51.05 respectively.

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