BHP Billiton is taking another a hit to its profits of up to $650 million, this time due to falling copper production and a slow down in oil shale in the US.
In a quarterly report to the market, BHP says underlying profit in the June half year will include additional charges of between $US350 million to $US650 million.
Earlier this month, BHP announced a write down in the value of its US shale oil operations by about $US2.8 billion ($AU3.76 billion) following falling global prices.
In January the world’s biggest miner announced it was shutting 40% of its US oil shale operations following sharp falls in prices. It started the current financial years with just ten rigs in operation from 26 last year.
The new charges announced today:
On top of that the demerger of South32 from BHP will mean a net loss of about $US2.1 billion post-tax in the June half year.
Taken together, the hit to profits from the write downs, including $US2 billion for the oil shale operations in the US, add up to $US4.75 billion.
Today BHP announced a 9% increase in overall production for the full year to the end of June, including a record iron ore tonnage.
Western Australia iron ore production increased 13% to a record 254 million tonnes on top of productivity gains, beating its own target of 250 million tonnes.
BHP, along with other miners, have been cutting costs and increasing tonnage to make up for falling commodity prices.
Andrew Twiggy Forrest of Fortescue Metals has criticised the bigger miners for increasing volumes, further depressing prices during a slow down in China, the biggest customer for iron ore.
However, BHP plans to dig more iron ore.
“Better productivity will be the sole source of volume growth at Western Australia Iron Ore in the 2016 financial year with production forecast to increase by 7% and unit costs are expected to fall to US$16 per tonne,” says CEO Andrew Mackenzie.
“We have improved the performance of our equipment, reduced costs, and increased volumes despite a significant reduction in capital spend. Our simpler portfolio following the demerger of South32 will help us maintain the pace of operational improvement, further supporting cash generation, margins and returns.”