BHP Billiton Ltd. (BHP), the world's largest mining company, released a lackluster output report Tuesday. According to the report, the company continues to take substantial losses related to its Australian uranium operations. The Age of Australia reported that BHP has been forced to make spot market purchases of uranium to fulfill its supply obligations. That has weighed on the company's bottom line and analysts expectations.
"Major operations were impacted by scheduled maintenance and tie-in activity associated with expansion projects," the report said, alluding to an ongoing expansion at the Olympic Dam where uranium was particularly affected.
"[Uranium] production was lower than the June 2007 quarter mainly due to a decline in grade and tonnes milled," the report stated. Uranium production from the company's Olympic Dam project totaled 933 tonnes in the third quarter, well short of its quarterly capacity of 1,250 tonnes.
Uranium experienced an electrifying price surge over the past year, peaking at $138 a pound in June. It was only $37.50 per pound in January 2006. The price has slipped to $75 a pound in recent months, but it's still well above Olympic Dam's contract value of less than $20 a pound.
BHP's production of copper and nickel, were also below many analyst's forecasts. Only the company's output of petroleum beat estimates. Copper production dropped 10% from the previous quarter, but it was still a 23% improvement over last year. Nickel output fell 19% from the previous quarter and 13% from a year ago.
Iron-ore production climbed 7% to 25.87 million tonnes in the three months through September from a year earlier. The output is a record high for the company, but it stopped short of meeting analysts expectations, and is only a marginal improvement over the previous quarter.
BHP's disappointing production figures have forced some analysts to scale back their profit forecasts for the company. ABN Amro cut its 2008 profit estimate by 5.5%, while JPMorgan trimmed its profit estimate by 2.8%.
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