BHP Billiton, the world's largest diversified resources group, said Tuesday that its output of iron ore, copper, nickel, aluminium and metallurgical coal reached record levels for the fiscal year ended June, helped by phased expansions at existing projects at a time of strong demand.

In Western Australia's Pilbara region, BHP's iron ore mines produced 25.75 million tonnes of iron ore in the June quarter, up six percent on the same period a year earlier and taking annual output to 98.20 million tonnes, up eight percent.

Copper output rose to 342,100 tonnes in the final quarter of its fiscal year, up 17 percent year-on-year and lifting annual output by seven percent to 1.25 million tonnes. BHP said copper output was boosted by the commissioning of a sulphide leach plant at the 57.5 percent owned Escondida mine in northern Chile in the second half of 2006.

The production data come ahead of BHP Billiton (nyse: BBL - news - people )'s full-year profit report on Aug 22 when it is expected

to post a record net income of about 13 billion US dollars, up from last year's 10.45 billion dollars.

The group's petroleum division produced 14.46 million barrels of oil equivalent for the three months to June, down one percent from a year ago, and taking full-year output to 56.72 million barrels, unchanged from a year earlier.

Nickel output for the June quarter totaled 47,700 tonnes, up 15 percent from a year earlier. That brought full-year production to a record 186,300 tonnes, up seven percent from fiscal 2006.

Output of metallurgical coal rose 21 percent year-on-year to 11.13 million tonnes in April-June, taking annual output to 38.43 million tonnes, an all-time high and up eight percent from the year before. BHP Billiton said the strong performance of the group's coal mines in Queensland, including record output from the Goonyella and Saraji mines pushed metallurgical coal output to record levels.

Energy or thermal coal output reached 22.28 million tonnes in the June quarter, up two percent from a year earlier, lifting full-year production by one percent to 87.02 million tonnes.

Aluminium output for the quarter was unchanged at 334,000 tonnes, but still brought output for the past year to June to a record 1.34 million tonnes, up two percent from the previous year. BHP said it was the sixth consecutive year of record aluminium production.



bruce.hextall@thomson.com

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Canadian National Railway Co.'s second-quarter profit fell 29 percent without last year's big gain from lower tax rates, and the company cut its full-year earnings expectations after a tough first half.

Canada's biggest railway, which has major operations in the United States, said on Monday that the quarter was marred by trying weather conditions, native blockades of its Ontario mainline and the surging Canadian dollar.

Still, CN Rail launched a new year-long share buyback, under which the company could repurchase up to 6.6 percent of its stock, worth as much as C$2 billion ($1.9 billion) at the current level.

In the quarter, it earned C$516 million, or C$1.01 a share, down from year-earlier C$729 million, or C$1.35 a share.

The latest period included a C$30 million gain from a lower Canadian tax rate. That compared with a C$250 million tax-rate reduction gain in the second quarter of 2006.

Excluding those items, income was C$486 million, or 95 Canadian cents a share, up from C$479 million, or 89 Canadian cents a share. That beat the average estimate among analysts polled by Reuters Estimates by 3 Canadian cents a share.

Revenue rose 1 percent to C$2 billion.

The Montreal-based company's operating ratio, a measure of efficiency, was 60 percent, virtually flat with a year earlier.

CN Rail said it performed well in the face of such problems as the week-long shutdown in June of its line to Prince Rupert, British Columbia, due to flooding, weakness in forest products shipments and native blockades of its Toronto-Montreal line.

The railroad now expects an increase in full-year earnings of about 5 percent, down from the previous forecast of 10 percent or more, it said.

The lowered outlook is a reflection of the weak first-half -- which also included a lengthy labor dispute in the first quarter -- not pessimism about the second part of the year, Vice-President James Foote told analysts.

In the quarter, forest products revenue fell 7 percent and intermodal was off 3 percent. CN reaped revenue gains from petroleum and chemicals, where sales rose 7 percent and automotive shipments, which climbed 17 percent, it said.

Last week, CN's main competitor, Canadian Pacific Railway, revealed it had received a takeover approach from a private equity group led by Brookfield Asset Management.

One option discussed for a CP Rail bid was the split-up of the railway into separate operating and infrastructure units.

CN Chief Financial Officer Claude Mongeau said his company had considered such a restructuring but had ruled it out.

"When you review it in detail, you realize there is a lot of leakage from an economic standpoint -- tax recapture, transfer taxes for the actual splitting of the assets," Mongeau said.

"Quite frankly, our analysis, unless we're missing something, would show that even at very rich valuations for the real estate, there is just no compelling case."

CN Rail shares rose 37 Canadian cents to C$60.35 on the Toronto Stock Exchange, representing a gain of nearly 20 percent this year.

World oil prices slid yesterday after reports that Opec could raise its crude output amid near record-high energy prices, analysts said.

New York’s main oil futures contract, light sweet crude for delivery in September, sank 90¢ to close at $74.89 per barrel. On Friday, the previous contract, for August delivery, climbed to $76.13, its highest level since August 9, 2006.
In London, Brent North Sea crude for September delivery dropped 78¢ to settle at $75.86 a barrel.

“The market fell under pressure from comments by Opec President and UAE Energy Minister Mohamed al-Hamli, who said on Sunday that oil’s strength and near-record prices are of concern and that the group is prepared to pump more oil if needed,” Sucden analyst Michael Davies said.

“In addition, the head of Opec research said that a fair price for producers and consumers is around $60-65 per barrel. This statement was a first indication that the group is prepared to do something about rising crude prices.”

Mike Fitzpatrick of Man Financial said: “Opec targeting $60 to 65 per barrel oil prices as fair to both consumers and producers may also be encouraging more traders to book profits.”

Opec is scheduled to meet on September 11 in Vienna, Austria, home to the 11-nation group’s headquarters.

Under rising demand, geopolitical tensions and infrastructure problems, oil is commanding high prices not seen for nearly a year, luring speculators who are pushing prices ever skyward.

In the past month, crude prices have climbed about $7 in London and $5 in New York.
On Friday, oil prices dipped as traders paused for profit-taking in the heated rally. Still, yesterday, Brent was within striking distance of its record high of $78.64 a barrel.

The historic peak was struck on August 7, 2006 after a pipeline spill forced British firm BP to close production at Prudhoe Bay, the biggest oil field in the US.
New York crude has some ground to go before reaching its all-time high of $78.40 a barrel, set on July 13, 2006.

AFP

Peabody Energy and ConocoPhillips entered into an agreement to explore developing a commercial-scale coal-to-substitute natural gas (SNG) facility using proprietary ConocoPhillips E-GAS technology.

E-GAS technology converts coal or petroleum coke into a clean synthesis gas, allowing virtually all impurities to be removed.

The project would be developed as a mine-mouth facility at a location where Peabody has access to large reserves and existing infrastructure. It would be designed to annually produce 50 billion to 70 billion cubic feet of pipeline quality SNG from more than 3.5 million tons of Midwest sourced coal, according to a release.

Peabody and ConocoPhillips would participate in project ownership along with other potential equity partners. The preliminary design and economic assessment is expected to be complete in early 2008.

Jim Mulva, ConocoPhillips chairman and CEO, said in a statement, "This project, as currently envisioned, would be designed to deliver over 1.5 trillion cubic feet of SNG in its first 30 years of operation from proven, domestic coal reserves."

ConocoPhillips (NYSE: COP) is an integrated energy company and one of the largest natural gas producers in North America. With about 38,700 employees worldwide, the firm operates in more than 40 countries and has assets of $173 billion.

St. Louis-based Peabody Energy (NYSE: BTU) is one of the world's largest coal producers.

OIL prices could hit $100 a barrel within months, oil analysts warned yesterday, unless Opec (Organisation of the Petroleum Exporting Countries) starts to up its oil output in the immediate future.


Some analysts suggest the spike in price will not hit until sometime next year, but others stress that pressure on demand is bringing the day of the $100pb dangerously close.

Speculators are bracing oil to go above $100pb and have up to $5bn sunk into futures at $100pb going forward.

They gain only if oil goes above that level which is a very strong indicator of how some key market watchers are thinking.

Meanwhile, oil prices dipped yesterday when the Opec cartel said it might increase production if high energy prices threatened global growth.

Opec president Mohammed Al Hamli said the organisation was “concerned” about higher prices, although it was not aware that dearer oil was damaging international growth at this point.

In a highly volatile market, news that Chevron had restarted its 270,000-bpd refinery in El Segundo, California, closed since early June, also helped market sentiment about the direction of the price for the black gold.

Chevron’s refinery restart and the Opec’s expressed concerns about the threat from higher oil prices helped ease sentiment on the oil front at the start of a new week, analysts said.

Sceptics warn however, with rising global demand the fragility of global oil supplies will see the price of oil go above $100pb within the next 12 months.

But by 10am yesterday, London’s benchmark Brent crude contracts for September delivery fell 52 cents to $77.57 per barrel as markets took their cue from the Opec statement.

Analyst at the New York Office of Man Financial John Kilduff said: “We’re only a headline of significance away from $100 oil.

“The unrelenting pressure of increased demand has left the market a coiled spring.”

New disruptions of Nigerian or Iraqi supplies, or any military strike against Iran, might trigger the rise, Mr Kilduff said in a recent interview.

Opec’s comments yesterday have eased tensions somewhat in the market.

Oil fell more than $1 to below $77 a barrel on Monday after some funds booked profits as OPEC expressed concern over near record prices and pledged to pump more crude if needed.

London Brent crude, now more reflective of global prices than US oil, traded at $76.54 by 1450 GMT after sliding as much as $1.22 to $76.42 a barrel. It hit $78.40 last week, just shy of its all-time high of $78.65 hit last August.

US crude traded $1.16 lower at $74.63. “There has not been any positive news over the weekend and we could be seeing some profit taking by funds with long positions,” one trader said. OPEC President and United Arab Emirates Energy Minister Mohammed al-Hamli said on Sunday that oil’s strength was a worry but the world economy was still growing in spite of it.

“The statement is important as it could be the first indication that OPEC may be willing to consider easing up on its supply allocations at its September meeting, and could be accounting for the softer opening we are seeing so far today,” a Man Financial report said.

A report citing the head of OPEC’s research division saying a fair price for producers and consumers would be around $60-$65 also weighed on the price. Consumer governments have called repeatedly on the Organisation of the Petroleum Exporting Countries to boost output to ease high prices. But OPEC has resisted so far, saying crude supplies are more than ample.

“If we see there is a need for more oil, we will supply more. But if we supply more now, it will go straight to stocks,” the OPEC president told Reuters. “Whether we are going to have to change by the end of the year, I don’t know.”

OPEC is scheduled to meet next on September 11 in Vienna. Other analysts said OPEC’s comments were unlikely to have a lasting impact on prices, given lingering supply worries. Analysts expect funds, which have been an important force in the latest oil rally, to set the near-term tone for oil prices, especially when most of them decide to book profits.

Data from the US Commodity Futures Trading Commission last week showed net long positions of speculators on the New York Mercantile Exchange crude oil market had fallen in the week to July 17 from record highs in the preceding week. “Some of them (funds) have huge profits in their books. Some are long since $60 a barrel. That’s huge money to cash in,” said Frederic Lasserre, head of commodities research at SG CIB.

“There is this idea that there could be massive selling as soon as we touch last year’s historical highs... And like last year, once you start to see the funds start taking profits, the downward spiral can be quite rapid.”

“The risk is for a near-term pull-back in oil,” added Citigroup in a research note. Even as oil hovers near record highs, global economies are proving resilient to surging energy prices and oil consumption has remained strong.

Economic growth in China, the world’s second-largest oil consumer, accelerated to 11.9 per cent in the second quarter, an 11-1/2-year high, though Reuters calculations show apparent oil demand growth was more tepid at 2.1 per cent in June.

U.S Stocks have closed higher Monday on above-forecast results from Schering-Plough Corp. and Merck & Co. and merger news in the financial, oil-drilling and equipment-rental sectors.

The Dow Jones Industrial Average ended up 92 points, at 13,943

The S&P 500 ended 7.4 points higher at 1,541.

The Nasdaq Composite advanced 2.9 points to 2,690.

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European stocks advanced Monday, helped by gains generated by commodity-related equities and automakers.

The pan-European Dow Jones Stoxx 600 index rose to 395.01.

Europe's regional indexes also picked up
momentum toward the end of the session.

The German DAX 30 index closed up to 7,944.21.

The French CAC-40 index moved up to 6,009.16.

The U.K.'s FTSE 100 index advanced to 6,624.40.

-----------------------------------

Crude-oil futures closed below $75 a barrel Monday after exports from an Angolan oil facility resumed and key oil producers made a positive forecast on global crude supplies.

The Organization of the Petroleum Exporting Countries said that the group was concerned about high prices and would be ready to supply more oil if needed.

Crude oil for September delivery lost 90 cents to close at $74.89 a barrel on the New York Mercantile Exchange.

Against this backdrop, August reformulated gasoline prices fell 6.05 cents to close at $2.1041 a gallon.

August heating oil dropped 3.61 cents to end at $2.0561 a gallon.