BHP cuts iron ore production guidance as Samarco operations remain halted

Commodity giant BHP Billiton has cut annual iron ore production guidance by 4% to 237m tons after it was forced to halt operations at its Samarco joint venture in Brazil, following the breach of the Fundão tailings dam and Santarém water dam on 5 November that killed at least 17 people.

The FTSE 100 group has reiterated annual production guidance for oil, copper and coal and said it forecast underlying attributable profit for the six months to 31 December to include additional charges of between $300m-$450m. The charges are mainly related to write downs, rig closures onshore US and to the closure of the Crinum coal mine.

Earlier this month, BHP announced its biggest ever write-down on the value of its shale assets in the US by $7.2bn (£5bn, €6.6bn) on a pre-tax basis, on the back of the ongoing slump in global commodity prices.

Total iron ore production for the half ending in December increased by 4% to 118m tons from the prior year, BHP said, although production at Samarco slumped 25% year-on-year to 11m tons, while total iron ore production for the second quarter rose 1% to 56.96m tons.

Meanwhile, oil production for the first half fell 5% year-on-year to 125m barrels of oil equivalent (BOE), as crude oil, condensate and natural gas liquids production fell by 3%.

Onshore US liquids volumes for the six months to the end of December increased 8% to 26.3m BOE, driven sharply higher by an increase in production from the Black Hawk and Permian sites, which saw output increase by 9% and 78%, respectively.

"Our operated assets continued to perform well over the last six months," said group chief executive Andrew Mackenzie. "The strong performance of our conventional petroleum assets has offset lower shale volumes following a reduction in investment to preserve the value of our acreage in current market conditions."

However, production at both sides declined 3% in the three months to the end of December, on the back of a reduction in capital spend of about 25% and BHP said it expects liquids volumes from both fields to record a slight year-on-year decline.

Copper production for the first half of 2016 fell 6% year-on-year, to 762,000 tons, as grade declines at the Escondida mine in Chile offset strong performances elsewhere.

"We continue to cut costs and remain focused on safely improving our operational performance to enhance the resilience of our business," Mackenzie added.