Mettle of big miners’ austerity to be tested – by Matt Chambers (The Australian – July 15, 2013)

THE nation’s biggest resource companies release quarterly reports this week in the first chance for investors to gauge progress in the big miners’ self-proclaimed new era of spending restraint and productivity.

BHP Billiton, Rio Tinto, Woodside Petroleum and Santos will report production, and energy firms revenue, from what has been a weaker quarter than it could have been from the nation’s resource-rich Pilbara in Western Australia. Rio and BHP experienced a very wet dry-season month of June in the Pilbara.

This is understood to have affected production from Rio, which reports tomorrow, and is likely to drag down its regional production, including minority partners’ interests, by a couple of million tonnes from the 61 million analysts had forecast.

Data from Rio’s Dampier and Cape Lambert ports in the Pilbara compiled by Credit Suisse backs this up, showing June exports this year were at their lowest in four years for the traditionally strong month. BHP, which reports on Wednesday, is said to have been hit to some extent.

While any impacts will be unwelcome, they are unlikely to worry investors and will be seen as one-offs that have a good chance of being compensated for over the rest of the calendar year.

Goldman Sachs analyst Craig Sainsbury said he expected a strong report from BHP. “With management squarely focused on productivity gains and cost reduction, we expect improvement across most major business divisions,” Mr Sainsbury said.

He is looking for production improvements in US shale oil, Queensland coking coal and copper production from the big Escondida mine in Chile.

Woodside’s Pilbara problems are not necessarily rain-related, but have already been released to the market in the form of a three million barrels of oil equivalent production guidance downgrade after unspecified problems at the Pluto LNG plant near Karratha. Shares fell 5 per cent when this was announced on July 3.

“Provided there have been no delays to the Pluto restart after unplanned maintenance, the weak quarter from the downtime should have little impact on the stock price,” RBC analyst Andrew Williams said.

Santos, which reports on Friday, will be scrutinised over drilling and construction progress at the $20 billion Gladstone LNG plant.

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