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Iron ore boom expected to lift BHP projection

BHP Billiton is expected to release a strong quarterly production report today because of increased iron ore output.

It could also restart its share buyback scheme.

Analysts say increased demand from the global steel industry should underpin BHP’s output, with a strong December quarter result expected.

The report is similar to Rio Tinto’s last week.

With interim financial results due in three weeks, BHP could announce a restart of its share buyback program, UBS analyst Glyn Lawcock said.

Since suspending the program in December 2007 with $US4.2 billion ($4.5bn) outstanding, BHP had only been able to return cash to shareholders through its regular dividend payment, Mr Lawcock said.

BHP’s previous buyback was announced in February 2007, when it increased an existing program by $US10bn.

On-market purchases continued until December 2007, when the buyback was suspended after BHP made a move on its rival, Rio Tinto.

Since November 2008, when the Rio Tinto bid was cancelled, the outlook for commodity prices and volumes had been relatively poor, and buybacks were put on hold because of cashflow concerns, Mr Lawcock said.

“We believe that BHP may announce a resumption of capital returns in the interim result . . . given the deferral of the balance payment to Rio (for their iron ore joint venture) to the second half of 2010 and better prices and outlook for commodities,” he said.

The miner is expected to announce a strong production report today, similar to the results released last week by Rio Tinto, which beat annual forecasts for iron ore and copper output.

Rio said most of its key commodities were recovering and iron ore set a production record of 217 million tonnes, up 13 per cent on the previous year.

Analysts said Port Hedland shipment statistics suggested strong production for BHP.

According to the Port Hedland Port Authority, total iron ore shipments, which include those of BHP Billiton, Fortescue Metals Group and other users, were 43.5 million tonnes in the December quarter, up 2.4 per cent from the September quarter.

Fortescue is expected to release its production report this week, which could show it also has achieved better results than forecast.

Shares in BHP Billiton finished down 13c at $43.31 while Rio Tinto were off 37c at $77.95…read more at The Australian