(Updates to close shares in fifth paragraph.)
July 23 (Bloomberg) -- BHP Billiton Ltd., the world’s biggest mining company, said fourth-quarter iron ore output gained 19 percent, beating analyst expectations, and flagged increased production this fiscal year after expanding mines.
Production was 56.6 million metric tons in the three months ended June 30, from 47.7 million tons a year earlier, Melbourne- based BHP said today in a statement. That compares with the 48.9 million tons median estimate of four analysts surveyed by Bloomberg. Rival Rio Tinto Group boosted ore output 11 percent in the period.
Iron ore companies are racing to expand output even as the price fell 30 percent in the first half, plunging the steelmaking ingredient into a bear market in March. The global supply increase has extended a global glut, trimming prices and forcing the closure of mines in China, the biggest consumer.
“The result shows that BHP’s strategy is working, with production up and costs down,” said Evan Lucas, a Melbourne- based market strategist at IG Ltd. There will be growing expectation for BHP to report an increase in profit and sales next month, he said.
BHP is scheduled to release full-year earnings on August 19, with net income forecast to rise by 32 percent, according to analyst forecasts compiled by Bloomberg. BHP advanced 1.2 percent to A$38.98 in Sydney, taking its gain for the year to 2.6 percent. Rio Tinto has dropped 5.4 percent over that time.
The company expects underlying earnings before interest and tax in the six months ended June 30 to include one-time charges totaling as much as $1.3 billion due to mine rehabilitation and the cost of jobs cuts, it said.
The world’s third-largest iron ore exporter said production from its Western Australian mines will increase to about 245 million tons in the 12 months to June 30, 2015. That includes output attributed to joint venture partners. The mines recorded a 14th straight annual output record.
Expansion in iron ore output and improved earnings may prompt BHP to begin a share buyback program, according to Tim Schroeders, a portfolio manager who helps oversee about A$1 billion ($940 million) in equities, including BHP shares, at Pengana Capital Ltd. in Melbourne.
“Given projected cash flows from improved output, the company could be on a good footing to begin capital management as early as this half’s results, the probabilty has definitely increased,” said Schroeders. BHP could buy back 5 percent of its market value, Macquarie Group Ltd. said last month.
Output rose in the quarter as the producer “delivered more tons from existing infrastructure and growth projects ahead of schedule,” Chief Executive Officer Andrew Mackenzie said today in the statement.
“We will remain focused on value over volume as we prioritize our brownfield development options and consider the next phase of portfolio simplification,” Mackenzie said.
Mackenzie is studying options to shed non-core assets to focus on iron ore, copper, coal and petroleum projects, seeking to raise free cash flow, boost production growth and deliver stronger returns on investment by operating with a smaller collection of assets with long lifespans.
Iron ore accounted for 31 percent of BHP’s revenue and 52 percent of operating income in the 12 months to June 30, 2013, according to data compiled by Bloomberg. The company today increased the mineral resource estimate of its West Australian iron ore mines by 13 percent.
Copper output rose 2 percent to 470,000 tons in the quarter, from 461,700 a year earlier, beating the 435,000 ton median estimate of seven analysts.
“Copper is also better than expected,” IG’s Lucas said.
Petroleum production rose 9 percent to 64.7 million barrels of oil equivalent in the June quarter from 59.2 million, beating the 63.4 million estimated of six analysts. It accounted for 27 percent of operating income in fiscal 2013.
BHP is considering options to sell and spin off non-core assets including its aluminum, nickel and bauxite units, according to UBS AG. It’s also holding talks on the sale of part or all of its Australian nickel unit, BHP said in May.
The producer is continuing “to actively study the next phase of simplification, including structural options,” BHP said in the statement.