* BHP declares force majeure after Olympic Dam incident
* Mine running at 25 percent capacity; full output by March
* Latest quarter iron ore output up 1 percent vs year ago
* Chile's Escondida copper output to rise 5-10 percent
* Shares fall 0.8 percent in London, lags Rio
(Adds more analyst comment, London shares)
By James Regan
SYDNEY, Oct 21 (Reuters) - BHP Billiton declared force majeure at the world's No. 4 copper mine and reported near flat quarterly output of iron ore on Wednesday, placing it deeper in the shadow of rival Rio Tinto.
BHP's first 2009/10 forecast for a 5 to 10 percent rise in production at its Escondida copper mine in Chile, the world's largest, failed to dispel the disappointment over a fall in quarterly copper output and news of force majeure on uranium and copper supplies from its stricken Olympic Dam mine. [ID:nSYD526552
The world's biggest miner said that Olympic Dam -- crippled by a runaway skip that took its Clark shaft out of operation on Oct. 6 -- is expected to continue running at 25 percent of ore-haulage capacity until full output resumes in the first quarter of next year, confirming expectations of an up to six-month disruption.
The outage has contributed to this month's rise in copper prices to a more than one-year high of $6,570 a tonne on Tuesday and threatened to further curtail this year's forecast supply surplus, and will eat into uranium supply from the world's biggest known deposit of the power plant fuel.
The copper price is expected to average $6,446 per tonne next year, according to a Reuters poll last week.
"I have a forecast surplus of over 200,000 tonnes. Obviously this will tighten things up and other cumulative disruption elsewhere might start to take their toll," said David Moore, commodities strategist at Commonwealth Bank of Australia.
The incident is expected to result in the loss of 70,000 tonnes of copper and 1,500 tonnes of uranium, said analyst Kieran Daly at Investec Securities in South Africa.
WEAK COPPER OUTPUT
But equity analysts were more put off by BHP's quarterly production report showing a drop in copper output and meagre 1 percent growth in iron ore.
For a graphic of BHP metals output, click: http://graphics.thomsonreuters.com/109/AU_BHPPRD1009.gif
"Most important was the fact that copper was down 8 percent year on year and quarter on quarter," said DJ Carmichael & Co analyst James Wilson.
Copper and base metals are due to account for 30 percent of BHP's operating profit for the fiscal year to end-June, iron ore 25 percent and oil 31 percent, Credit Suisse said.
"Unfortunately these were all below our expectations but we expect production volume to be weighted to Q2 and momentum to be evident in half-year results," a note said.
BHP shares in London dipped 0.8 percent to 1,811 pence by 0826 GMT and have underperformed Rio for months.
Shares in BHP have risen just 5 percent this month, half as much as Rio Tinto, which were flat on Wednesday. Rio shares have more than doubled since January; BHP is up by just 30 percent.
The 1 percent year-on-year iron ore growth from BHP -- the world's No. 3 iron ore producer -- was far short of Rio Tinto's 12 percent rise in the same quarter. BHP also left its full-year guidance unchanged while Rio upgraded its forecast production by 5-7.5 percent last week.
Although BHP's near-flat performance in its iron ore segment came in the traditionally high-output period, when the seasonal Pilbara iron ore belt is its driest and mining is least apt to face disruptions from heavy rains and cyclones, BHP said it was due to long-term expansion rather than short-term issues.
At Olympic Dam, output was down even before the shaft damage: maintenance works drove down production 31 percent to 37,700 tonnes of cathode in the first quarter.
A runaway skip, or ore carrier, forced the immediate shutdown of the underground mine's main haulage system.
Investigations into the incident were not yet complete, with ore now being hoisted to the surface via its smaller, secondary Whenan shaft, which can handle only about 25 percent of haulage.
Olympic Dam's copper is sold in Europe, Australia and Asia under contracts negotiated annually based on monthly LME cash settlement prices. Its uranium is sold in Britain, France, Sweden, Finland, Belgium, Japan, South Korea, Canada, the United States and Spain.
Force majeure notices free a miner from liability if it can't meet a contract due to events beyond its control.
On a brighter note, the company said production at its majority-owned Escondida mine in Chile, which has fallen this year due to operational problems at one mill and declining ore quality, was forecast to rise 5-10 percent after repairs to its Laguna Seca mill and higher average grade of copper in the ore. (Additional reporting by Eric Onstad in London; Editing by Jonathan Leff and Jason Neely)