BHP axes coal costs, fuels aluminum writedown speculation

Feeding mounting speculation of possible asset writedowns, world’s No.1 miner, BHP Billiton (ASX,NYSE:BHP), said Wednesday its aluminum and nickel businesses continue to face major challenges.

In its half-year production update, BHP blamed the strong Australian dollar and “weak pricing environment” for the weak results on its Australian alumina and nickel operations.

Analysts quoted by (subscription required) believe the mining giant will take an impairment charge against its aluminum assets alongside half-year results in February.

Based on BHP’s data, the book value of its aluminum division is $8.6 billion, but experts interviewed by FT think it is worth barely over $5.4 billion.

When announcing its new CEO last week, Rio revealed it would write down the value of its aluminum assets by $10 to $11 billion, mainly because of the unsuccessful purchase of Canada’s Alcan in 2007. The company also said it would take a $3 billion impairment against recently acquired coal assets in Mozambique.

The mining giant, however, reported strong second-quarter performance in iron ore, petroleum, copper and coking coal.

In terms of iron ore, BHP’s 46.34 million tonnes of December quarter output from its Pilbara region iron ore mines capped a 12th straight record of second-half production. This included BHP’s minority partners’ share.

BHP’s attributable quarterly iron ore production was 42.19 million tonnes, beating most expectations by about 500,000 tonnes.

Coking coal production was down a mere 1% compared to the previous quarter at 8.89 million tonnes, thanks to a production recovery triggered by the resolution of industrial disputes in Queensland. However this improvement was offset by planned maintenance outages and the closure of the high-cost Gregory mine.

(Image by Tyler Olson


Poor decisions force Rio Tinto’s CEO departure, leaves the group with $14bn charge >> >>

BHP considers withdrawal from aluminum and other non-essentials >> >>

Australian coal industry to slash 900 jobs >> >>