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BHP to write down $1.3 billion more


BHP Billiton is facing another $1 billion hit to its bottom line and has cut its full year iron ore production target.

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The mining giant says its first half results will include writedowns worth $US911 million ($A1.32 billion) relating to redundancies and closures, as well as a revaluation of its copper business.

BHP also expects to produce 237 million tonnes of iron ore in the 2016 financial year, 10 million tonnes lower than its original target, following the suspension of operations in November at its Samarco joint venture mine in Brazil.

Production guidance for its petroleum, copper and coal businesses remains unchanged.

BHP produced 57 million tonnes of iron ore in the December quarter, an increase of one per cent from last year, helped by record production at its Western Australian operations.

The resources giant, however, has flagged further writedowns as it grapples with the impact of the commodities slump.

It plans to write down between $US425 million and $US575 million from its first half earnings before interest and tax (EBIT), on account of redundancies and closures, inventory writedowns across its businesses, and royalty and taxation matters.

The company will take another $US336 million impairment charge on account of a revaluation of copper sales.

The writedowns are on top of the $US7.2 billion ($10.3 billion) writedown in the value of its US shale assets that the company announced last week.

“Commodity prices fell substantially in the first half of the 2016 financial year putting pressure on the whole resources sector. We continue to cut costs and remain focused on safely improving our operational performance,” chief executive Andrew Mackenzie said on Wednesday.

BHP also faces billions of dollars in fines and payment of damages after the deadly dam disaster in Brazil that has left at least 17 persons dead, but said on Wednesday it is too early to estimate the financial impact.

The resources giant said its petroleum production declined five per cent during the December quarter to 60.2 million barrels of oil equivalent (mmboe), as it continued to reduce the number of rigs in its US shale business.

Despite cutting back on capital expenditure, it expects to achieve the production target of 237 mmboe this financial year, on the back of strong output from its conventional oil and gas business.

Copper production in the quarter fell nine per cent to 385,000 tonnes but the company expects to maintain its annual target of 1.5 million tonnes, helped by a jump at the Olympic Dam operations in South Australia.

BHP shares were eight cents lower at $14.65 at 1025 AEDT.

“While BHP produces a solid report with few material surprises, the overall story is one of flat to marginally lower production against a background of sharply lower and still falling commodity prices,” CMC Markets chief market analyst Ric Spooner said.


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