In BHP’s interim report released today, it said that its NSW energy operations were also a growing contributor to production and earnings.
The 31% and 20% increases in hard coking coal and weak coking coal prices, respectively, increased its metallurgical coal’s underlying EBIT by $US927 million (net of price linked costs) and underpinned record profitability at Illawarra Coal over the six-month period to December 2011.
“In contrast, a 15% decline in sales volumes at Queensland Coal reduced underlying EBIT by $216 million while higher costs, that partly reflected our flood recovery efforts, reduced underlying EBIT by a further $481 million,” BHP said.
“[I]ndustrial action and the remnant effects of wet weather continued to constrain the performance of our leading Queensland Coal business.
“While system capability is no longer constrained by the 2011 floods, the extent to which industrial action will continue to impact production, sales and unit costs is difficult to predict.”
Miners at seven BHP Mitsubishi Alliance Queensland coal mines voted to stop work for a week after enterprise agreement negotiations between unions and the company broke down last week.
Overall metallurgical coal revenue was up by 11.1% to $4.3 billion, while earnings were up by 5.8% to $1.5 billion. BHP’s energy coal revenues were 22.4% higher while its EBIT was up a massive 135.6% to $787 million.
Half yearly production records were achieved at New South Wales Energy Coal and Cerrejon Coal in Colombia, two of BHP Billiton’s export oriented energy coal operations.
“In energy coal, stronger volumes and a higher proportion of export sales, largely associated with the accelerated expansion of our New South Wales Energy Coal business, increased underlying EBIT by $65 million in the period,” the company said.
A 22% and 11% increase in export and domestic coal prices, respectively, increased underlying EBIT by $391 million, net of price linked costs. Stronger volumes and a higher proportion of export sales, largely associated with the accelerated expansion of New South Wales Energy Coal, increased underlying EBIT by $65 million.
BHP also confirmed that first production from the New South Wales Energy Coal RX1 project is expected in the second half of the 2012 calendar year, one year ahead of schedule.
The RX1 project will increase run-of-mine thermal coal production by approximately 4Mtpa.
The rapid progression of BHP’s development pipeline also led to an increase in exploration and business development costs in the period.
BHP Billiton announced approval of the Caval Ridge mine development and associated Peak Downs mine expansion in Queensland in the December 2011 half year. The $2.1 billion project will add 8 million tonnes per annum of high quality coking coal capacity, with first production anticipated in the 2014 calendar year.
A later low-cost expansion to 10Mtpa is slated for development. This investment commitment would bring metallurgical coal projects in execution to a total of $4.9 billion.
