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Written by: Staff

SYDNEY, Apr 26 (Reuters) The world's number-one miner, BHP Billiton Ltd./Plc., said on Wednesday a shortage of workers and mine equipment was constraining output across the sector as global demand for mineral commodities soars.

An inability to churn out optimum amounts of copper, zinc, iron ore and other industrial staples could cost BHP Billiton and rivals such as Rio Tinto Ltd./Plc. millions of dollars in lost revenues, analysts said.

''Prices have been rarely, if ever, this high,'' Australia&New Zealand Bank commodities analyst Andrew Harrington said.

''Now is the time to make hay.'' The pain of higher costs was being softened by the big prices commanded by raw materials, and most analysts expect BHP Billiton will meet market forecasts for a full-year profit of about $9.8 billion.

The company also said on Wednesday that copper output in its March quarter soared 28 percent from a year earlier to a record 319,100 tonnes, although bad weather cut oil and condensate production by 12 percent and iron ore production by 5 percent.

BHP Billiton said costs were rising everywhere, from bulldozer tyres costing up to $20,000 each to diesel fuel to heat underground mines, with no relief in sight.

''A shortage of people, equipment and supplies has led to tight labour markets and difficulty in sourcing construction and drilling plant and machinery, which in turn has led to rising input costs,'' the company said.

A weaker U.S. dollar was making it more costly to purchase equipment and was also putting pressure on spending, it said.

''The miners have been managing the crisis, but it looks like their work has delayed the crisis rather than averted it,'' ABN AMRO warned in a client note. ''Mine expansions are likely to be constrained,'' it said.

PROJECT COST PRESSURES BHP Billiton said it was being hit hardest with higher costs in Australia and in its oil and gas business in the Gulf of Mexico, where costs ''continue to challenge the ability of BHP Billiton to deliver development projects to budget''.

The company is reviewing an earlier decision to proceed with its promising Atlantis South field, which it hopes will yield 200,000 barrels of oil and 180 million cubic feet of gas a day. It estimates it will cost at least $1.1 billion to develop.

In Australia, BHP Billiton is committed to expanding its iron ore mining operations and is also building a new nickel mining and processing complex at a total cost exceeding $3 billion.

''You would think a company like BHP would just bite the bullet in times like these of high prices, but that's not so simple,'' said Australia&New Zealand Bank's Harrington.

All miners are benefiting from global demand, particularly from China, which has helped drive metals prices to new records.

Nickel, needed to make stainless steel shine, sold for an all-time high of $20,000 a tonne in the last London Metal Exchange floor session.

Copper needed in construction and electrical wiring, had soared to record highs, jumping almost 6 percent to $7,230 a tonne, while zinc hit a record of $3,385.

BHP Billiton released a mixed quarterly production report, with a big jump in copper output and aluminium production edging up 2 percent from a year earlier to 340,000 tonnes from 332,000 tonnes.

Oil and condensate production fell 12 percent to 10.886 million barrels from 12.345 million barrels as damage from hurricanes in the United States continued to impact output.

Iron ore production fell 5 percent to 22.50 million tonnes following drenchings at the company's mines in Australia due to storms, while Australian nickel output also suffered from bad weather, reducing the yield by 18 percent to 40,200 tonnes compared with the previous quarter.

Year-on-year, nickel output was up 93 percent, taking into account last year's takeover by BHP Billiton of WMC Resources.

BHP Billiton shares were flat at A$31.02. The stock has risen about 36 percent on the Australian Stock Exchange this year, outpacing gains of about 12 in the broader market ($1=A$1.34) REUTERS CS KP1215

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