Premium industrial metals & minerals company BHP Billiton Limited BHP reported first-half fiscal 2018 (ended Dec 31, 2017) operational results.

Its aggregate iron-ore output came in at 117 million tons (Mt) at the end of the first half of fiscal 2018, flat year over year. The company noted that record productivity from Mining Area C and the Jimblebar mine was offset by reduced opening of stockpile levels (following the Mt Whaleback screening plant fire in June 2017) and planned maintenance activities conducted in other mines.  However, the company reaffirmed its iron-ore productivity guidance within the range of 239-243 Mt for fiscal 2018.

In the first six months of the fiscal, gross copper output was 833 kilo tons (Kt), up 17% year over year. The upside stemmed from solid volumes secured from the Escondida mine, on the back of the ramp-up of the Los Colorados Extension plan.

Aggregate energy coal’s output was 14 Mt at the end of the first half of the fiscal, up 4% year over year. The upside was driven by higher yield of the company’s New South Wales Energy Coal mine.

However, dropping 4% year over year, aggregate productivity of metallurgical coal came in at 20 Mt in first-half fiscal 2018. The downside resulted from lower volumes in the company’s Blackwater and Broadmeadow mines.

Also, aggregate productivity of petroleum slipped 7% year over year to 99 barrels of oil equivalent (MMboe) in the first half. Productivity decreased due to natural field decline and depletion of the company’s U.S. petroleum assets (on account of Hurrian Hate and Harvey).

Moving Ahead

BHP Billiton intends to boost its near-term operational performance on the back of increased safety measures, greater capital discipline and elevated productivity. The company stated that its aggregate productivity volumes will be up 6% year over year in fiscal 2018, on the back of higher yield generated from its ongoing latent capacity copper and iron ore projects.

During first-half fiscal 2018, the company sanctioned an investment of $2.5 billion for the Spence Growth Option (expansion of the Spence copper mine) development. Notably, the company is currently working on four projects in potash, copper and petroleum, with a collective budget of $7.5 billion.

The company believes its productivity will remarkably improve in the upcoming quarters on the back of these projects.  

Our Take

BHP Billiton currently carries a Zacks Rank #2 (Buy). Over the last three months, this  stock has rallied 19%, outperforming 16.2% growth recorded by the industry.

We believe further inflation in iron-ore prices will likely benefit mining giants like BHP Billiton, Vale S. A., VALE, Rio Tinto plc RIO and Kumba Iron Ore Limited KIROY. Prices of this major steel-making component has been rising due to factors like the steel-production curtailing decision of the government in China, inflation in steel prices and the steel plant’s restocking demand hopes.

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