As industrial metal copper prices hit record highs, BHP Billiton PLC has raised its annual copper production forecast, but announced further cost overruns at its major potash project in Canada.
The world's largest mining company by market value stated on Tuesday that it now expects to produce between 1.9 million and 2.0 million tonnes of copper in the financial year ending in June, up from a previous forecast of 1.8 million to 2.0 million tonnes.
CEO Mike Henry indicated that the metal's better-than-expected output was driven by the strong performance of the large Escondida copper mine in Chile, which will help the company capitalize further on the record-high prices.
U.S. copper futures have surged to historic highs as investors bet on a shortage of the metal, which is widely used in construction, electronics, and automotive manufacturing. BHP Billiton noted that "stronger copper prices are being driven by healthy demand and supply disruptions among some competitors."
BHP Billiton reported a second-quarter copper production of 490,500 tonnes, down 1% from the previous quarter and 4% lower than the same period last year. Total production for the first half of the financial year remained largely flat compared to the prior year. The company had previously warned of rising costs at its Jansen potash project in Saskatchewan, Canada, which is currently its only major development project under construction. At that time, the miner indicated that construction costs for the first phase could range between $7 billion and $7.4 billion, up from an earlier estimate of $5.7 billion, but noted that the estimates were under review.
On Tuesday, BHP Billiton announced that it now expects the first-phase costs of the Jansen project to reach $8.4 billion, including contingency fees. The company attributed the latest cost overruns to "construction labor hours and material quantities that were not included in the previous execution cost estimate."
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