Quarterly production results in Australian mining

This week we take a closer look at quarterly production results in Australian mining, including BHP, Newcrest, Fortescue and OZ Minerals.

We speak exclusively with Buru executive director Eric Streitberg about Western Australia's most significant onshore oil discovery in a decade.

We also hear from ANZ's commodities analyst Natalie Robertson on why it's a good time to buy copper.

Buru surges on WA oil discovery  
Shares in Buru Energy Limited (ASX:BRU) surged after the junior explorer announced an oil discovery in the Canning Superbasin in Western Australia's north-west. The discovery, called the Ungani feature, has been described as the state's most significant onshore oil discovery in a decade.

Buru executive director Eric Streitberg spoke with Finance News Network about the significance of the discovery.

"It's 30 years since the last oil discovery in the Canning Basin and nobody's found anything in the basin that's flowed anything like these rates. Compared to what has been found in the basin previously, it's a stunning success."

While the exact size of the Ungani feature has not been identified, speculation has estimated it could be as large as 20 million barrels. Mr Streitberg says this figure is probably on the high side, and while there is the possibility of a higher figure, at this stage Buru's estimate is between half a million and 20 million barrels.

Buru now plans to drill an immediate appraisal well to identify the size of the field, flowing properties and reservoir. In 2012 the company intends to undertake further seismic testing and drill more wells with its project partner Mitsubishi.

Buru had been looking to bring in a big partner who had the resources to explore the basin. Mr Streitberg said, "Mitsubishi are basically buying into our project by spending up to $150 million and for that they earn half of, basically all of our tenements." The farm-in deal was inked in June 2010.

Buru's own capital expenditure is relatively small: "The wells should cost $5 million to $6 million for each well and they should pay out in less than six months. So, it's a sort of bootstrap project that pays for itself as it goes along, which makes it very attractive," added Mr Streitberg.

Mr Streitberg believes there's a good chance of more discoveries in the Canning Superbasin, "These sort of things [the discovery] are rarely a once off. Once you find a geological trend, there tends to be a number of them. So, we'd be very hopeful that there's some more Ungani look-alikes out there. And, next year we'll be acquiring some more seismic data to try and identify them".

BHP delivers record WA iron ore shipments
BHP Billiton Limited (ASX:BHP, NYSE:BHP, LON:BLT) has delivered record iron ore shipments from Western Australia, rising to an annualised rate of 173 million tonnes per annum. The global miner's September quarter production report shows iron ore production rose 24 per cent and petroleum production was 19 per cent higher compared to the year before. Copper production declined 24 per cent over the year due to strikes at its Escondida mine in Chile and planned smelter and refinery outages at its Olympic Dam mine in South Australia.

Newcrest Q1 output slips, confirms FY target
Newcrest Mining Limited (ASX:NCM) has confirmed its full year production and cost targets despite reporting a fall in its first quarter output. The gold miner has attributed the fall to maintenance shutdowns and weather disruptions. In the three months to the end of September Newcrest's gold production fell 16 per cent from the quarter before to 587,296 ounces. Copper production also eased in the quarter, coming in at 19,228 tonnes. Newcrest says, "Strong exploration results continued during the quarter at Wafi-Golpu, Namosi, Lihir, Gosowong and Telfer".

Fortescue Q1 shipments up 5.4%
Fortescue Metals Group Limited (ASX:FMG) posted a 5.4 per cent increase in its first quarter iron ore shipments, coming in at 12.2 million tonnes. In the three months to September 30, 2011 the Pilbara-focused miner's production costs dropped 6.4 per cent to $US49.78 a tonne. Selling prices edged up to $US160 per dry tonne. Fortescue's Cloudbreak and Christmas Creek mines produced 40.1 million tonnes of iron ore. The company says it is on track to meet its target of 155 million tonnes per annum by 2013, despite an anticipated fall in iron ore prices.

OZ Minerals Q3 output eases, confirms FY target
OZ Minerals Limited (ASX:OZL) has posted a slight drop in its third quarter copper production but affirmed that it is on track to reach its target for the full year. The copper and gold miner recorded 27,217 tonnes of copper production in the three months to the end of September and is working towards delivering up to 110,000 tonnes in the 2011 calendar year. Gold production also eased in the quarter, however silver production increased. Oz Minerals is currently ramping up its recently acquired $2 billion Carapateena project in South Australia and says it is also on the hunt for more acquisitions.

Commodities
The ANZ's commodities analyst Natalie Robertson says it's a good time to be buying copper.

"We think that Chinese buyers are likely to re-enter the market ... BHP suggested that China's copper inventories had been substantially liquidated. And that actually confirmed our sources ... that stocks in China are quite low ... So we think that the recent drop in copper prices should spur some re-stocking opportunities in copper and be supportive going forward."

"It [copper] appears to be oversold. Prices should pick up again from these levels. But given all the uncertainty in the market we probably won't see prices going up to the same levels. They reached record highs back in February, we don't think it's going to reach that level. But it will be a good opportunity to buy at this stage," added Ms Robertson.


Melissa Beaumont Lee