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BHP Billiton cuts its annual iron ore target in wake of Samarco disaster

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The Samarco dam disaster continues to wreak havoc upon BHP Billiton, forcing the miner to reduce its iron ore export target and sending its shares to a new post-boom low.

BHP had previously vowed to ship 247 million tonnes of iron ore from its global portfolio of mines, but will now ship just 237 million tonnes.

The cut comes one day after rival miner Rio Tinto revealed weaker than expected iron ore production and forecasts, and suggests a slowing of iron ore supply growth from the world's biggest miners.

The Samarco tragedy, which killed at least 17 people in Brazil, will likely cost the company millions in fines and reparations too, but BHP said it was too early to accurately quantify the full financial extent of the disaster.

The company has already confirmed that it will record a $US7.2 billion ($10.4 billion) pre-tax impairment against the book value of its US shale division, and revealed on Wednesday that first half earnings would be hit by up to $US450 million in further charges relating to redundancies, inventory write-downs and taxation matters.

The taxation charges worth between $US125 million to $US175 million come after a year in which BHP was embroiled in several high-profile tax disputes.


The company is disputing a $522 million tax bill with the Australian Tax Office over the company's use of a Singapore marketing hub, and was also sent a $US288 million coal royalty bill from the Queensland government.

BHP declined on Tuesday to say which state or nation the tax and royalty charges related to.

In Australian dollar terms, the size of the taxation and royalty charges seems similar to the Queensland royalty bill, which comprised $186 million in royalties and $102 million of interest.

There was no update on whether the company intends to cut its progressive dividend policy, but chief executive Andrew Mackenzie said the company would continue cutting costs to protect its balance sheet.

"Commodity prices fell substantially in the first half of the 2016 financial year putting pressure on the whole resources sector. We continue to cut costs and remain focused on safely improving our operational performance to enhance the resilience of our business," he said.

"In this environment we are also committed to protecting our strong balance sheet so we have the financial flexibility to manage further volatility and take advantage of the expected recovery in copper and oil over the medium term."

Full-year export targets for copper, petroleum and coal have remained steady, according to December quarter production results published on Wednesday.

The main highlight from the production numbers was in the petroleum division, where the 60.2 million barrels of oil equivalent produced was better than analysts had expected.

The result was achieved despite a sharp reduction in the number of rigs working BHP's US shale acreage, and was due to increased production from the company's "conventional" offshore oil assets.

Morgans analyst Adrian Prendergast said the production numbers were "steady" and BHP looked like a good long-term prospect.

"We view BHP as offering the biggest upside potential in a sector recovery scenario and also view it as holding one of the most resilient businesses within the global resource sector," he said in a note to clients.

BHP shares closed 52ยข lower at $14.21 on Wednesday, the lowest share price since January 11, 2005.

West Texas crude was fetching $US28.32 per barrel on Wednesday while iron ore was fetching $US42.78 per tonne.

Copper was fetching $US1.988 per pound while US gas was fetching $US2.21 per unit.