* BHP signals well placed to reward shareholders
* Quarterly iron ore output rises 16 pct
* Petroleum output slips, but maintains guidance
By James Regan
SYDNEY, Jan 22 BHP Billiton
posted strong quarterly iron ore, coal and copper output,
putting it in a position to meet shareholder pressure for higher
capital returns as spending on new projects winds down.
However, any capital return may not come before the 2015
financial year starting in July as the the world's biggest miner
looks to build up more cash from recently completed projects,
and as iron prices start to ease, according to analysts.
"I think it's not likely a calendar 2014 story, more likely
2015," said Ben Lyons, an analyst at ATI Asset Management, which
owns shares in BHP. "The key determinant will be commodity
prices and currencies."
Investors including fund manager BlackRock, have
called on BHP and other miners to boost shareholder returns as
the era of high construction costs to build new mines shifts
into a lower-cost production phase.
BHP, like its peers, has focused on reducing costs, spending
less and selling unwanted businesses over the past 18 months,
after splashing out on expansions during the mining boom.
Three of BHP's four main growth drivers improved in the
December quarter, with a 16 percent increase in iron ore output
from a year ago and record production at its coal business in
Australia's Queensland state.
Copper output also rose, but petroleum production - the
second-biggest revenue earner last year after iron ore - fell 4
percent, BHP said in its production report on Wednesday.
IRON ORE PRICE
Chief Executive Andrew Mackenzie, appointed chief executive
in May, said the miner aimed to boost returns via financial
discipline and internal competition for funds and that
productivity gains would continue in the second half.
"This strategy leaves us well positioned to deliver a
substantial increase in free cash flow and higher returns to
shareholders," he said in a statement.
A buyback is seen as a more likely way to reward
shareholders because BHP stock is listed on both the London and
Australian stock exchanges. Under a buyback stockholders have
the option to tender a portion or all of their shares at a
premium to the market price.
BHP bought back more than $22 billion worth of its shares
between August 2004 and June 2011. The miner also has a
progressive dividend policy, under which it has pledged to
increase the amount of its dividend every year.
BHP has been boosted by a strong price for iron ore, which
held up despite concerns that softening economic growth in China
would curb steel production.
Despite forecasts by analysts such as Goldman Sachs and UBS
for a fall under $80 a tonne, iron ore prices rose above $130
for most of the second half of 2013, triggering a 20 percent
rise in BHP's share price in the final six months of the year.
Macquarie Bank sees iron ore finishing 2014 at $115-$120.
BHP posted a drop in quarterly output from its petroleum
division as it worked to extract more oil from its Eagle Ford
shale gas property in the United States, but stuck to its fiscal
2014 guidance of 250 million barrels of oil equivalent.
Unlike rivals such as Rio Tinto and Glencore Xstrata
, BHP has relied on its petroleum business to offset
soft periods in metal and coal markets. Its footprint in the
sector has grown with the advent of shale gas and oil
exploitation in the United States.
Petroleum accounted for $13.2 billion in revenue last year,
behind the $20.2 billion generated by iron ore.
Metallurgical coal output in Queensland rose 10 percent in
the December quarter to 9.6 million tonnes, beating an estimate
by UBS of 8.8 million tonnes.
Copper output rose 6 percent from a year ago to 440,000
tonnes, in line with expectations.
Shares in both BHP and Rio eased 1.7 percent on Wednesday in
an overall market down 0.8 percent.