Samarco closure lowers BHP’s iron ore expectations

BHP Billiton has been forced to lower its iron ore production forecast for the 2015/16 financial year in the wake of the tailings dam disaster at its Samarco mine in Brazil in November.

BHP announced on Wednesday a forecast of 237mt for global iron ore production, down 4% from prior guidance, due to the continued closure of Samarco, a joint venture between BHP and Vale.

“Mining and processing operations at Samarco remain suspended following the breach of the Fundão tailings dam and Santarém water dam on 5 November 2015,” the company told the market on January 20.

“Pellets continued to be shipped from port stockpiles during the December 2015 quarter with the final shipment of pellets expected in January 2016.”

BHP announced total global iron ore production for the December 2015 half year of 118mt, up 4%. The increase was largely drive by a 6% production increase from its Western Australian operations, underpinned by full capacity operations at its Jimblebar mining hub and improved ore handling plant utilisation at Newman.

“This was partially offset by a train derailment and a power outage at the port which reduced volumes in the December 2015 quarter,” BHP reported.

Production through the remainder of the financial year in WA remains on track, BHP said, subject to a “benign” wet season.

BHP’s announcement of a lower global iron ore forecast came a day after Rio Tinto announced a flat December quarter for iron ore shipments.

While Rio’s 91.3mt of global iron ore shipments (100% basis) in the December quarter was up 11% year-on-year, it was a 0% change from the September quarter of 2015.

Rio chief executive Sam Walsh nonetheless said December’s was a successful quarter.

“Against a challenging market backdrop for the industry, Rio Tinto remains focused on operating and commercial excellence to leverage the low-cost position of our Tier 1 asset base,” Walsh said.

“In 2015, we delivered efficient production, meeting our targets across all of our major products, while rigorously controlling our cost base.

“We will continue to focus on disciplined management of costs and capital to maximise cash flow generation throughout 2016,” he added.