Zacks_Analysts' Blog : BHP Reports Higher Production - Analyst Blog

Mining giant BHP Billiton Ltd. (BHP) reported a 6% year-over-year increase in its iron ore production for the first quarter of fiscal 2011 ending Sep 30, 2010.

BHP Billiton sustained a production loss based on the dissolution of the joint venture with Rio Tinto (RTP). The joint venture would have substantially increased BHP Billiton’s iron ore production in future. The joint venture for producing iron ore in Australia was dissolved with no break fee when it was disapproved by some of the Australian regulators.

The company’s oil and natural-gas, copper and coking coal production stretched 3%, 3% and 10%, respectively.

During the quarter, expenditure on minerals exploration and petroleum exploration was $129 million and $74 million, respectively. BHP Billiton also provided guidance of $900 million for petroleum exploration expenditures in fiscal 2011.

BHP Billiton is committed to long-term growth through its key investment strategy. During fiscal 2010, BHP delivered five growth projects and approved two major growth projects budgeted at $695 million and made pre-commitments totaling $2,237 million to start the work on four other projects.The company, at present has 20 projects in hand for a total budget of $25 billion.

BHP Billiton is at present concentrating on its buy-out offer for Canada's Potash Corp. of Saskatchewan Inc. (POT), the world's biggest fertilizer manufacturer, for $130 per share.

The $130 per share offer was once rejected by Potash’s shareholders as being grossly inadequate. They believe that a 16% premium over the August 16 closing price of $112.15 grossly undervalues Potash in terms of its global operating capacity and growing market demand. Thus, BHP Billiton will review its options and make further announcements in the fullness of time.

The stock retains its short term Strong Buy rating (Zacks #1 Rank) based on the optimism of the Potash buy-out.