Iron ore price offsets nickel debacle
Iron ore price offsets nickel debacle

BHP Billiton's decision to close its Perseverance nickel mine because of safety fears would not have an impact on Nickel West's production this financial year, mining giant has claimed.

But it is still assessing the impact on nickel production in future years.

With the pressure on chief executive Andrew Mackenzie to deliver on promises of higher returns for BHP shareholders, the company yesterday gave a rare insight into the price-performance of its divisions in key commodities before it delivers its first-half financial results on February 18.

Total production from its Pilbara iron ore operations jumped 20.2 per cent to 108 million tonnes in the first half of the financial year, with BHP's attributable production up to 97.8mt.

That was just below analyst expectations but the average received price was 10 per cent higher than the December half of 2012, heightening expectations of bigger shareholder returns.

Prices for the vast majority of its commodity groups softened in the second half - iron ore fell 4 per cent, oil slipped and hard coking coal prices were 10 per cent lower than in the June half. However, the unexpected strength of iron ore in the December half, with BHP's cost-cutting measures, will allow it to deliver a strong financial result.

Nickel West, however, has faced difficulties. The loss of Perseverance, which was needed for blending ore for its other WA operations, has already given local BHP executives a serious headache. The fact it happened in the context of price falls of 13 per cent for the half and 17 per cent compared with the six months to December 2012 was expected to add to the pressure on Mr Mackenzie and his executive team to stem the flow of losses from the division.

The BHP results came as the board of mid-tier iron ore producer Mount Gibson Iron revealed its cash pile had grown.

The company, which also reported its December-quarter results yesterday, has watched its bank balance grow to $484 million - or 44¢ a share - compared with its closing share price of $1.02 yesterday.

That cash balance - $64 million more than on September 30 - came despite Mount Gibson paying out $22 million in dividends, $24 million in corporate taxes and spending $13 million on three new haul trucks.

Mount Gibson sold 5.1 million tonnes of ore in the quarter, at an average price of $US108/t free on board. It retained its 9mt to 9.5mt guidance for the full year.

BHP fell 32¢ to $37.63. Mount Gibson gained 3.5¢ to $1.02.

The unexpected strength of iron ore, with BHP's cost-cutting, will allow it to deliver a strong financial result. * " *

The West Australian

Popular videos

Compare & Save

Our Picks

Compare & Save

Follow Us

More from The West