BHP Billiton has cut its production guidance for copper, coking coal and iron ore for 2017, citing industrial action at a copper mine in Chile and bad weather in Australia.
The world’s biggest miner by market capitalisation on Wednesday also flagged the sale of some onshore gas fields in the US — a move that comes at a time when BHP is under pressure from activist hedge fund Elliott Advisers to sell off its petroleum unit.
“Everything we do at BHP Billiton is designed to create value for all our shareholders . . . but we have more to do and we are not standing still,” said Andrew Mackenzie, chief executive. “Plans to monetise a portion of our non-core acreage for value, such as parts of the southern Hawkville, are under way.”
Shares in BHP were up 1 per cent at A$24.19 in midday trading on the ASX in Sydney.
In an operational review, BHP said that divestment of non-core onshore US acreage is progressing, with the sale process for up to 50,000 acres of the southern Hawkville well advanced. It added that the Fayetteville field was under review, with divestment an option being considered.
The update comes as BHP steps up efforts to blunt a campaign by Elliott Advisors pressing the miner to reform its corporate structure and sell off its petroleum division.
BHP has rejected the proposals as “financial engineering” and warned there are major flaws in Elliott’s restructuring plan that would destroy value for shareholders. But some leading stock holders are urging BHP to consider demerging the whole oil and gas unit as a way of generating additional value.
BHP bought its Fayetteville shale gas interests in Arkansas for $4.75bn in 2011 from Chesapeake Energy. At the time the field was producing more than 400m cubic feet of gas per day. But a subsequent collapse in gas prices caused the company to slow its drilling programme and write down the value of the assets by $2.84bn within 18 months.
BHP first flagged a possible sale of its Fayetteville acreage in 2014 but no transaction ever materialised as global oil and gas prices slumped.
Macquarie said on Wednesday that it suspected a sale is the most likely outcome.
BHP slashed guidance for copper production in full-year 2017 by as much as 18 per cent to 1.33m-1.36m tonnes following a 44-day strike at its Escondida mine in Chile. Workers at the mine, which is operated by BHP, have returned to work, enabling production to resume, and talks on a new wage deal are expected to reopen next year.
Damage to railways in the Australian state of Queensland from Cyclone Debbie forced BHP to cut production guidance for coking coal — a vital ingredient in steelmaking — to 39m-41m tonnes, from 44m tonnes.
The miner also narrowed its iron ore guidance to 231m-234m tonnes, from 228m-237m tonnes. BHP said record production at its iron ore mines Western Australia in the first nine months of 2017 was partially offset by wet weather in the March quarter.
Analysts said the sharply lower copper production guidance, echoing similar reductions by rival Rio Tinto last week, was as expected and already factored into the company’s share price.
Morgan Stanley said the lower coking coal guidance due to the cyclone could shave $600m off its full-year revenue forecast for BHP, which is about 1.5 per cent of the miners’ total revenues.
Follow Jamie Smyth on Twitter: @JamieSmythF