The mudslide disaster at the Samarco iron-ore mine in Brazil early last month killed at least 11 people and left another 12 missing. Millions of tonnes of ore waste in man-made dams need to be treated. Picture: REUTERS/RICARDO MORAES
The mudslide disaster at the Samarco iron-ore mine in Brazil. Picture: REUTERS/RICARDO MORAES

MELBOURNE — BHP Billiton, the world’s biggest mining company, trimmed its full-year iron ore forecast after its Brazil joint venture was halted following a dam breach in November that killed at least 17 people. The shares fell to the lowest level in 11 years in Sydney trading.

Iron ore production should be 237-million tonnes in the 12 months to June 30 from a year earlier, compared with its July estimate of 247-million tonnes, Melbourne-based BHP said on Wednesday.

Operations at Samarco, jointly owned by Vale, have been suspended since a dam failure that Brazil described as its worst environmental disaster. Vale last month cut its full-year output guidance by as much as 10%.

"Iron ore production was probably a little under expectations," Ric Spooner, chief analyst at CMC Markets in Sydney, said.

"There are no upside surprises in this, and in an environment where the markets are negative on the sector, that lack of upside surprise could create a bit of price disappointment."

BHP dropped 3.5% in Sydney trading, the lowest since January 2005. The producer has plunged 45% in the past 12 months.

The Brazil disaster and the plunge in prices of commodities from iron ore to oil have helped drag BHP’s shares down. The $4.9bn post-tax writedown on the value of its US shale oil and gas assets flagged last Friday and additional charges of as much as $450m announced on Wednesday, added to concerns over BHP’s ability to retain a dividend policy that seeks to maintain or increase returns each year.

The benchmark price of iron ore, BHP’s top earner, has slumped more than three-quarters since its 2011 peak, while oil plunged this month below $30 a barrel for the first time in 12 years. The Bloomberg World Mining index of 80 stocks including BHP and Rio Tinto Group, has lost more than 40% in the past 12 months amid concern over a weaker pace of growth in China, the biggest commodities consumer, and supply gluts in energy to metals.

Iron ore output in the three months ended-December 31 had risen 1% to 57-million tonnes, BHP said. That missed the median estimate of 59.3-million tonnes among seven analysts surveyed by Bloomberg. Rio Tinto, the second-biggest miner, said on Tuesday its iron ore output climbed 10% in the final quarter of last year.

Petroleum output had fallen 5% to 60.2-million barrels of oil equivalent in the quarter compared with a year earlier, BHP said. That beat the median estimate of 58.4-million barrels among seven analysts. Full-year guidance was maintained at 237-million barrels.

"Commodity prices fell substantially in the first half of the 2016 financial year, putting pressure on the whole resources sector," CEO Andrew Mackenzie said. BHP was "committed to protecting our strong balance sheet, so we have the financial flexibility to manage further volatility", he said.

BHP’s realised iron ore price declined 39% in the six months to end-December compared to the same period a year earlier, while the oil price it received plunged 51% and its copper price 29% over the period, the producer said in the statement.

BHP will cut its dividend payment by half to $0.31 in the six months to December 31, according to Bloomberg Dividend Forecasts, while investors were also anticipating further cuts to capital expenditure, Mr Spooner said.

Total iron ore output, including third-party tonnes, from Western Australia rose 5% to 64-million tonnes from a year earlier. That missed a 67.4-million tonne estimate among four analysts surveyed by Bloomberg. BHP said it was maintaining full-year guidance of output of 270-million tonnes from operations in the Pilbara district.

BHP forecasts its share of full-year iron-ore output to rise about 1.7% in the year to June 30, compared to the previous 12 months. Iron ore is the only division forecast to increase volumes this financial year, with BHP’s guidance predicting annual output declines in coal, copper and petroleum.

Copper output declined 9% in the quarter to 385,000 tonnes to beat the 377,000 tonnes median estimate among five analysts.

Production was being constrained by declining grades at Chile’s Escondida, the world’s biggest copper mine, BHP said.