BHP Billiton's shares fall as Deutsche Bank cuts target price

BHP Billiton’s shares fell on Thursday as Deutsche Bank reiterated a ‘hold’ rating and cut the target price to 1,390 from 1,410p, following the group’s half year operational review.

The miner on Wednesday said copper production fell 7% to 357,000 tonnes in the December quarter, reflecting power outages at its Olympic Dam mine in South Australia.

As a result, BHP cut its full year guidance by 2% to 1.62 million tonnes.

Deutsche Bank it continues to sit below guidance at 1.57m tonnes, noting that BHP’s Escondida Water Supply project requires a “big second half”.

Mechanical completion has been achieved at Escondida with first water expected in the March 2017 quarter. BHP has reaffirmed production guidance at Escondida of 1.07m tonnes, which Deutsche said implies an annualised rate of 1.2m tonnes per annum for the second half.

Meanwhile, iron ore production in Western Australia jumped 9% to 70 million tonnes for the December quarter. BHP maintained its full year guidance of between 265 million and 275 million tonnes.

The realised iron ore sales price of $55 per tonne was below Deutsche Bank’s $60 estimate.

The copper realised price of $2.41 per pound was, however, above the bank’s forecast of $2.28.

Deutsche said it has increased its forecast for fiscal year earnings in 2017 and 2018 by 0.6% and 1.2% respectively, on better realised pricing and an increase in its Escondida numbers.

Overall, the bank said BHP has reported a broadly flat production result, with iron ore performing strongly but copper, petroleum and met coal all falling short of its expectations.

Shares dropped 1.13% to 1,441p at 1116 GMT.