BHP (BHP) to Double Iron Ore Production in Pilbara

With the release of an environmental review Monday BHP Billiton Ltd. (NYSE:BHP) is one step closer to more than doubling iron ore output at its properties in the Pilbara area of Western Australia.

This will be done via the development of a new harbor at Port Hedland.

Iron ore exports for the diversified miner will jump to about 150 million metric tons annually at this time to 350 million tons a year by 2020.

In environmental impact statement of BHP, released for public comment Monday, the miner said it had a goal for 240 million tons of capacity from the outer harbor, with shipping berths for eight bulk carriers.

BHP Billiton closed Monday at $97.98, falling $1.82, or 1.82 percent.

Diversifieds BHP (BHP) (VALE) (RIO) (TCK) (FCX) Trade Mixed

Shares of diversified miners such as BHP Billiton (NYSE:BHP), Rio Tinto (NYSE:RIO), Vale SA (NYSE:VALE), Teck Resources (NYSE:TCK) and Freeport-McMoran (NYSE:FCX) were trading mixed Thursday, metals prices moved in various directions.

In base metals trading, May copper dropped 1.05 cents to settle at $4.284 a pound, July platinum increased $18.40 to $1,795.60 an ounce and June palladium was up $8.95 to $774.25 an ounce. May copper fell 1.05 cents to settle at $4.284 a pound.

Iron ore demand is expected to remain tight over the medium term, and over the long term should jump in response to the rebuilding needs coming from the consequences of the earthquake in Japan.

Gold for June delivery rose $16.80 to settle at $1,472.40 an ounce on the Comex division of the New York Mercantile Exchange.

Spot gold was up 1.4 percent to $1,474.30 an ounce, closing in on its record $1,476.21 set on Monday. Silver rose $1.427, or 3.6 percent, to $41.66 an ounce.

The collapsing U.S. dollar, tightening in China, sovereign debt crisis in Europe, unrest in the Middle East, increasing inflation and consequences of the Japanese earthquake are just some of the negative catalysts affecting the price movements.

The U.S. dollar was close to session lows, resulting in a further impetus to gold. The U.S. currency traded as low as 74.617, its lowest level since December 2009.

Teck Resources closed Thursday at $52.30, falling $0.59, or 1.12 percent. Rio Tinto closed at $71.70, up $0.04, or 0.06 percent. Vale SA ended the day at $32.65, up $0.64, or 2.01 percent. BHP Billiton closed at $100.42, rising $0.17, or 0.17 percent. Freeport-McMoran closed at $51.93, dropping $0.38, or 0.73 percent.

Rio (RIO) Says Iron Ore, Coal Production Down in 1Q

Not unexpectedly, Rio Tinto (NYSE:RIO) announced coal and iron ore production in the first quarter fell as a result of the heavy rains which hampered mining in Australia. Also affected was uranium output.

Production of iron ore fell from 50.1 million tons the prior quarter to 41.9 million metric tons. Hard coking-coal production dropped to 1.6 million tons, a 29 percent decline.

Full year earnings for Rio and major competitor BHP Billiton (NYSE:BHP) are expected to come under some pressure from the slowdown.

Evens so, Rio estimates it'll produce about 191 million tons of iron ore in 2011, up from the 184 million tons produced in 2010.

Paul Galloway, a Sanford C. Bernstein Ltd. analyst, wrote today in a note to clients, “Given this relatively robust full year production guidance, we view the substantial miss in iron ore production as a largely one-off occurrence and would expect to see improvement in the short-term. The overall impact on full-year 2011 earnings estimates in the market may be smaller than might initially be expected.”

Chief Executive Officer Tom Albanese said concerning production, “Our Australian coal, iron ore, uranium and alumina operations were affected by the extreme weather in the first quarter. Most are recovering and are benefiting from continued strong prices.”

Rio was trading in New York at $71.22, falling $0.91, or 1.26 percent, as of 2:15 PM EDT.

ArcelorMittal (MT) May Be No. 5 Iron Ore Miner

According to RBC Capital Markets, when ArcelorMittal (NYSE:MT) begins to report mining assets separately, the company may end up ranking as the fifth largest iron ore producer in the world.

Because of changes in global reporting rules, the giant steelmaker, is about to separate out its mining business into its own division. Why that's important is it is probable the group is likely to emerge as the world's No. 5 iron ore miner.

According to an exhaustive report by RBC Capital Markets, at the end of the first quarter 2011, when ArcelorMittal reports mining assets separately, AM Mining could rank as the fifth largest iron ore producer globally, through forecasts to 2015. This year, RBCCM believes AM Mining could have the second-largest EBITDA contribution to the group (22%), and account for more than 50 percent of AM group growth capex.

What this could mean, according to RBCCM, is with mining assets reallocated from steel divisions to AM Mining, management will be forced to re-evaluate performance metrics across the group. For a group owned to the tune of 40 percent by one person, ArcelorMittal has come a long way in a relatively short time: internal change has been the order of the day for years.

Arcelormittal closed Friday at $35.75, falling $0.44, or 1.22 percent.

BHP (BHP) Spending $9.5 Billion to Expand Iron Ore, Coal Operations

BHP (NYSE:BHP) announced it is going to spend about $9.5 billion to expand Australian iron ore and coal mining operations. BHP has said they have plans in place to spend about $80 billion over the next five years to expand the company.

With commodity prices having soared for years, BHP is looking to grow by organic means rather than through acquisitions, as the valuations of quality companies have skyrocketed and cost in many cases are prohibitive.

The company has also failed at three major takeover tries, and it appears countries are also protecting their raw materials as well, as in the case of Potash Corp. (NYSE:POT) in Canada.

The leading global miner said it would invest $6.6 billion in a total investment of $7.4 billion to continue production growth in the company's western Australian iron ore operations.

Investment will include the development of the Jimblebar mine, rail links and additional berths and ship loaders at its Port Hedland site.

BHP said it had also approved three key metallurgical coal projects at its Bowen Basin site in Queensland.

BHP will put in $2.5 billion of the total $5 billion investment, which will see the new Daunia mine developed, its Broadmeadow mine's life extended by 21 years and the stage three expansion of its Hay Point coal terminal.

In a third statement, the company added it had approved a $400 million investment to expand Hunter Valley Energy Coal in New South Wales with the goal of increasing production.

BHP Billiton closed Friday at $90.07, falling $0.59, or 0.65 percent.

Alcoa (AA) Rebounds, Leads Dow

Although struggling since highs hit in February, Alcoa (NYSE:AA) appears to be back on track again, thanks largely to the expected boost in aluminum demand from the Japan earthquake and tsunami as the country prepares to rebuild.

Alcoa let the Dow up on Wednesday, as some commodity prices continue to rise in anticipation of the orders mining companies will get.

Commodities like copper, iron ore, steel and aluminum are expected to generate strong orders in the short and long term.

Alcoa closed Wednesday at $16.95, gaining $0.50, or 3.04 percent.

Ivanhoe (IVN) CEO Likes Copper, Iron Ore

With the eventual start of the reconstruction in Japan, Ivanhoe Mines (NYSE:IVN) Chief Executive Officer Robert Friedland said he's bullish on iron ore and copper prices in the near future.

"What happened in Japan is insanely bullish for copper," Friedland said at the Mines and Money conference in Hong Kong.

"I'm a copper bull, not really a gold bull," he added.

With damage to infrastructure and buildings estimated as high as $308 billion, it'll take years for Japan to rebuild, and it's sure to be a boon to the two commodities when combined with ongoing demand from China, and to a lesser extent, India.

More than likely it'll also extend the ongoing bull market beyond the years it was expected to last. It's anyone's guess now as to the length of time some raw materials will continue to rise in price.

Ivanhoe closed Tuesday at $26.36, gaining $0.28, or 1.07 percent.

Rio Tinto (RIO) Says Ore Supplies to Tighten on Japanese Demand

Mining giant Rio Tinto (NYSE:RIO) says iron ore supplies are sure to tightened as a result of the rebuilding effort in Japan when it begins.

Also noted was the ability of the miners, including BHP Billiton (NYSE:BHP) and Vale SA (NYSE:VALE), to acquire enough equipment to ramp up production to meet the growing demand.

Sam Walsh, Rio Tinto's iron ore division chief said, "The impact of the Japanese earthquake and tsunami have been many and diverse and they affect us. Some steel mills have suspended operations and suppliers of heavy equipment, such as Hitachi, have been impacted."

"There is a large reconstruction ahead, the magnitude of which is only just being realized," Walsh added.

Demand for iron ore and steel is expected to rebound when Japan begins rebuilding everything from homes to power plants and analysts say Japan's steel capacity, at more than 130 million tons, will be able to support the reconstruction.

Rio Tinto closed Tuesday at $66.13, falling $0.62, or 0.93 percent.

Alcoa (NYSE:AA), Reliance Steel & Aluminum (NYSE:RS) Boosted by Dahlman Rose

Alcoa (NYSE:AA) and Reliance Steel & Aluminum (NYSE:RS) were both upgraded by Dahlman Rose Friday, boosting them both from "Hold" to "Buy."

Concerning Alcoa, Dahlman said they see the company's downstream business improving, along with a stronger aluminum price outlook. Also noted was the alumina business, which they see becoming more profitable in 2011.

For Reliance, they see them benefiting from the broader U.S. domestic steel market continuing to improve. The construction market is expected to start to move within an estimated 9 to 12 months, suggesting companies may start to spend on steel and other materials before that. That could help Reliance through 2012 if that's how it works out.

Along with the steel industry, Dahlman also likes iron ore, copper, aluminum and molybdenum going forward.

Alcoa was trading at $16.01, gaining $0.26, or 1.68 percent, as of 3:03 PM EST. Reliance Steel was trading at $53.24, up $0.12, or 0.23 percent.

Vale (Nasdaq:VALE), BHP Billiton (NYSE:BHP) Should Follow Rio Tinto's (NYSE:RIO) Price Hikes

The increase in iron ore contract prices by Rio Tinto (NYSE:RIO) should result in iron ore producers like Vale (Nasdaq:VALE) and BHP Billiton (NYSE:BHP) following their its footsteps.

It also indicates it could be a sign of bullishness in the industry.

Canaccord said, "Global miner Rio Tinto (NYSE:RIO) recently raised Q1 iron ore contract prices for Chinese steel mills by approximately 7% from Q4 levels. The new price of - $139/ton f.o.b. would be up - $10/ton from the current level. We conclude the price hike by Rio Tinto is likely to be followed by other big iron ore producers, such as Vale (Nasdaq:VALE) and BHP Billiton (NYSE:BHP)."

RIO was trading at $71.43, up $1.16, or 1.65 percent, as of 11:49 AM EST. Vale was trading at $34.70, up $0.79, or 2.33 percent. BHP was at $91.66, up $1.86, or 2.07 percent.

Vale (NYSE:VALE) Expanding Copper Production

In a move to diversify its holdings and profit from rising copper prices, Vale (NYSE:VALE) announced they're increasing copper production by about 45 percent over the next five years, expected to reach 1 million tons annually by 2015.

Vale is the largest producer of iron ore in the world at this time.

Tito Martins, Vale's Executive Director for Base Metals said, "Diversification is part of Vale's strategy. Copper, given current market trends, appears to be an extremely attractive investment."

Production goals before the decision were to extract 691 tons of copper in 2015.

In 2011, copper production estimates for Vale are to produce about 332,000 tons. In 2010 they produced 131,000 tons of copper over the first nine months of the year. That underperformed because of a long strike in Canada.

In the third quarter of 2010, copper production only accounted for less than 3 percent of the revenue for Vale, giving them a lot of room to grow in the years ahead, assuming it'll be profitable and copper retains price support.

Iron ore on the other hand accounted for about 60 percent of revenue in the third quarter.

Vale is also looking to the fertilizer sector as their other main focus for growth.

That is also expected to climb in revenue because of the expectations food prices will continue to rise, increasing margins and providing farmers with more capital to invest.

Rio Tinto (NYSE:RIO) Shrugs Off China's Higher Interest Rate Announcement

The announcement from the Deputy Governor of the People’s Bank of China that they'll probably raise interest rates soon in order to continue their battle against rising inflation didn't have much impact on Rio Tinto (NYSE:RIO), which announced they're going to continue to expand spending through 2011 to $11 billion, close to three times what they're spending in 2010.

The story of China is sometimes misunderstood or overreacted to, as even though they may cut back on spending and tighten their spending, it's a matter of degree, and they're still going to grow strongly, although probably not at the pace they have been.

Demand for some raw materials may fall, but China also likes to stockpile as well, so it's hard to tell the depth of the decline in imports they make in relationship to commodities.

Rio knows that China will continue to buy over time, and whatever steps they take in the short term does nothing to change the demand for commodities over the long term which is far from being exhausted.

Rio Tinto CEO Tom Albanese sees there being more volatility in the short to mid-term. He said, “The long-term picture remains very positive for our businesses, but there remain a number of risks in the mid-to- near term, and for us this points to continued volatility.”

Of the approximate $11 billion budget projected for 2011, about 40 percent of that will be set aside for the iron ore sector.

Vale (NYSE:VALE) Earnings, Production Lowered

Canaccord Genuity said they're reiterating their "Buy" rating on Vale SA (NYSE:VALE), even though they do see earnings falling by about 1 percent over the next couple of years, and iron ore production falling.

"We have reviewed our Vale valuation following recent capital spend and production guidance to incorporate Q3/10 financial forecasts and to reflect stronger iron ore spot prices than we had expected...Our new EPS estimates for 2011 and 2012 are $4.51 and $4.39, both down 1%. Our new EBITDA forecasts for 2011 and 2012 are US$35.4 billion and US$34.8 billion, both up 1%. Our new iron ore production forecasts are 311 Mt in 2011 and 332 Mt in 2012, down from prior estimates of 331 Mt and 350 Mt," said Canaccord.

Vale was trading at $31.79, gaining $0.28, or 0.89 percent at 11:43 AM EST. Canaccord has a price target of $37 on the miner.

BHP Billiton (NYSE:BHP) Starts Buying Back Shares

Under pressure from shareholders, and with little to show over the last several years from failed attempts to acquire Rio Tinto (NYSE:RIO), and trying to merge iron ore operations with them, along with not being able to successfully acquire Potash Corp. (NYSE:POT), BHP Billiton Ltd. (NYSE:BHP) has decided to buy back shares, evidently considering that the best use of extra capital at this time.

BHP and CEO Marius Kloppers probably wouldn't want to undertake another acquisition attempt any time soon, as a failure could end Kloppers' tenure at the company and show weakness as to his ability to get a deal done.

This is really a resumption of a buyback program which has been suspended in 2007, where they were going to back $13 billion of their own shares. Now they're going to acquire another $4.2 billion in shares, BHP said in a statement today.

Some had thought BHP was going to buy back a larger amount of shares, generating the question as to whether or not they have any contingency plans in place.

Shareholders have also pressured BHP to make acquisitions for the purpose of growth, buy it seems they've decided to accept buying back of shares rather than the pursuit of other companies at this time.

Citigroup (NYSE:C) Sees Possible $10 Billion Share Buyback by Rio (NYSE:RIO)

Citigroup (NYSE:C) said they believe Rio Tinto (NYSE:RIO) could launch a $10 billion share buyback sometime in 2011 while maintaining their capex project for its mine projects.

“We expect Rio to move into a net cash position in 2011. This will allow the company to look at growing through M&A or returning cash to shareholders through buybacks,” Citigroup wrote in a note.

After the takeover of Alcan in 2007, Rio Chief Executive Officer Tom Albanese has worked on paying down the debt from the deal and profits increased as metal prices, along with coal and iron ore, went up.

Citigroup estimates net cash for Rio Tinto to be $9.4 billion in 2011, and increasing to $23.9 billion in 2012. Capex is expected to reach $9 billion in 2011.

Rio said their focus is on investing in areas that will add growth to the company.

Is BHP's (NYSE:BHP) Marius Kloppers Becoming a Liability?

There is pretty much one thing on the mind of shareholders of BHP Billiton (NYSE:BHP), and that is expansion. And the nature of the business of BHP is it will have to be, for the most part, expansion through acquisition.

What's interesting about this from the point of view of BHP CEO Marius Kloppers, is it seems he has something else on his mind besides expansion alone when he's making these attempted deals, which three in a row have failed.

Although the attempted deal with Rio Tinto (NYSE:RIO) failed, it actually did something much more profound for the iron ore industry, and that was to break up the cartel-like steelmakers who had had the best of the pricing deals on an annual basis.

Kloppers changed that with his imposition of a pricing system of a much shorter duration and which was based on spot market prices of iron ore.

After following Kloppers and the way he bid for Potash Corp. (NYSE:POT), it made me wonder if he had a secondary and more important agenda in the bid, which would be to expose and weaken Canpotex, the price-fixing, potash marketing monopoly in Canada, which was the reason for the deal being rejected, contrary to any other reasons asserted.

Kloppers said from the beginning that he would eventually leave Canpotex and compete on market conditions rather than the artificial holding back of production in order for the socialist Canadian province of Saskatchewan to continue taking in royalties at prices they prefer.

With BHP having recently acquired a large potash project in Canada, it could have been his purpose to undermine the cartel and monopoly in order to do things his way when production begins.

Some believed if Kloppers didn't get Potash his job may be in trouble, but I'm not yet convinced of that. The share price of the company is hovering near all-time highs, and you just can't get much better than that as far as performance goes.

The question is what type of future is Kloppers preparing for BHP shareholders, and there's where the weak point of his performance is, or at least is perceived to be.

But one has to take into account the way he led the battle against China and others to implement the new pricing system for iron ore, and that will benefit BHP in the long run from that segment of the company.

The other question about Kloppers is if he has good insight when attempting to make deals. With Rio many feel he shouldn't have bothered with the attempted merger with their iron ore business, as it never had any chance of being allowed to go through with the opposition in many countries around the world.

One thing to like about Kloppers was his unwillingness to overspend on Potash, when he could have increased the bid by a lot more and not diluted BHP much, although they would have had to work through the added costs over time.

Pressure is slowly mounting on Kloppers to come up with something, and it may be he will have to add several smaller companies to make the type growth impact shareholders want to see.

The challenge he and all others in mining and raw materials face is everything is at a premium price now, and very little could be acquired at a good price.

So to placate investors he may have to pay out more than he would ever want to in order to show a commitment to growth. Doing that with smaller companies is much safer and probable than with the huge companies he's been targeting.

Eldorado (NYSE:EGO) Begins Iron Ore Shipments from Vila Nova

Already one of the top gold miners as measured by low costs, Eldorado Gold (NYSE:EGO) has launched its first shipment of iron ore from its Vila Nova Mine in Brazil, which could help lower gold production costs even more for the company.

The first shipment included 45,000 tons of lump ore grading approximately 63% Fe, which was sold to the Chinese spot market, according to a press release from the company.

Paul N. Wright, President and Chief Executive Officer of Eldorado said, "We are pleased to be able to realize the first shipment of iron ore from our Vila Nova Mine and I would like to thank our Brazilian team for their outstanding efforts. Vila Nova is part of our strategy to expand our business in Brazil which we see as an important component in the continued growth of Eldorado Gold."

A second shipment is expected to proceed in the latter part of November, which will include an additional 45,000 tons of sinter ore.

The two shipments are part of Eldorado's strategy to test the quality of the ore and operational factors to see how the work is performed. They plan on shipping another 90,000 tons to that end.

Eldorado was trading in New York at $17.99, gaining $0.09, or 0.50 percent at 1:08 PM EDT.

Morgan Stanley (NYSE:MS) Raises Gold Projection for 2011

As gold prices continue to break records on a weekly basis, projections continue to rise based on a number of factors, and Morgan Stanley (NYSE:MS) has raised its forecast for gold prices in response.

Morgan Stanley, "Accelerating weakness in the U.S. currency, driven by fears of renewed quantitative easing to confront sluggish U.S. growth, is proving to be a boon to commodity markets."

At a support level, Morgan sees gold holding at about $1,315 for 2011, while under a bull scenario rising to as high as $1,512.

Morgan noted they like other commodities and commondity stocks, including copper and iron ore. They see iron ore rising to $135 a ton in 2011.

Two copper companies they like are Kazakhmys Plc and Xstrata Plc.