Diversified mining giant BHP Billiton saw shares rise on Wednesday after reporting a 'solid' second quarter, according to analysts.

The company said it expects to deliver a compound annual growth rate (CAGR) of 10% in copper equivalent terms over the next two years. The firm said that this was due to the release of latent capacity at a number of its highest margin businesses and strong growth across our broader portfolio.

Shares were up 0.84% at 2,098.5p by 10:35.

Aluminium write-down speculation increases

While iron ore production (its biggest business) and petroleum output came in strong in the first half, the company highlighted the pressures facing its aluminium and nickel business, leading many to speculate that it could potentially follow in the footsteps of Rio Tinto by writing down the value of some assets.

Alumina production grew 17% to a record 2.4m tonnes in the first half, while aluminium and nickel output fell 10% and 2.0%, respectively. BHP warned that a strong Australian dollar and a weak pricing environment "continued to place pressure on the group's Australian alumina and nickel operations".

According to the Financial Times, the book value of BHP's aluminium assets is $8.6bn but analysts reckon they are worth around $5.4bn.

Last week, Rio's Chief Executive Officer stepped down after the company said it would recognise a non-cash impairment charge of around $14bn in its 2012 results, $10-11bn of which was due to a reduction in the value of its aluminium assets.

"Solid quarter"

BHP's production report for the first six months of its fiscal year said that iron ore production and sales reached a record high for the 12th consecutive half year. Iron ore output rose to 81.96m tonnes in the half year to December 31st 2012, up 2% year-on-year "as the business continued to benefit from the company's decade long investment in supply chain capacity". The company reiterated its guidance of producing 183m tonnes of iron ore for the full year, up 5.0%.

Full-year petroleum production guidance also remains unchanged at 240m barrels of oil equivalent, after the company produced 121m barrels of oil equivalent in the first half, up 11% year-on-year.

As for the base metals, copper (+14%), zinc (+1.0%) and uranium oxide concentrate (+8.0%) all registered growth in production year-on-year, while lead (-20%) and silver (-12%) slipped. Elsewhere, manganese ore (+11%) and energy coal (+7.0%) production increase, while metallurgical coal output was flat.

BHP's diamonds business, which it has agreed to sell to Harry Winston Diamond Mines for $500m, continued to struggle, with output down 35% on the year before. The company said that the disposal of this division is expected in the first half of 2013.

BHP remains the top pick, says Nomura

Analysts at Nomura labelled the second quarter as "solid" on Wednesday, highlighting that the business remains on track to meet targets.

They noted that iron ore and petroleum production came in ahead of forecasts, while copper and thermal coal lagged slightly. Nevertheless, the 10% CAGR for copper equivalent production is in line with Nomura's expectations, analysts said.

"BHP remains our top pick among the global diversified miners and we regard it as a cornerstone investment in the sector. The group's diversification across the wider commodity space (bulks, base metals, oil) is complemented by its high-quality, tier-one asset base that generates attractive cash flow through the cycle."

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