“We Remain On Track”: BHP Signs Off On Solid Production Report

By Glenn Dyer | More Articles by Glenn Dyer

Mining giant BHP Group said on Tuesday it has maintained its production and cost guidance for the year to June after an uneventful three months to December.

The global mining giant said in its December quarter and half-yearly production report that production and sales of copper, iron ore, coal and nickel were all on track.

The miner added that all major projects under development are tracking to plan.

At the end of December, it had six major developments in petroleum, copper, iron ore and potash, with a combined budget of $US11.4 billion ($16.5 billion) over the life of the projects.

“We delivered solid operational performances across the portfolio in the first half of the 2020 financial year, offsetting the expected impacts of planned maintenance and natural field decline,” new BHP CEO Mike Henry said in Tuesday’s statement.

“Production and cost guidance is unchanged, and we remain on track to deliver slightly higher production than last year. Our six major development projects are progressing well, and we continue to advance our exploration programs in petroleum and copper.”

Second-quarter iron ore output dipped from the preceding quarter due to planned car dumper maintenance work in October.

Pilbara iron ore output for the three months to December was 68 million tonnes, compared with 66 million tonnes reported a year earlier. It fell by nearly 2% from the September quarter.

But for the six months to December production was up 2% to 121.4 million tonnes from 119.25 million.

“Guidance for the 2020 financial year remains unchanged at between 242 and 253 Mt (273 and 286 Mt on a 100 percent basis), with a stronger second-half performance expected in line with our plans,” BHP said yesterday.

Group copper equivalent production was broadly unchanged in the December 2019 half-year, with volumes for the full year expected to be slightly higher than last year at between 1.705 million and 1,820 million tonnes.

The Olympic Dam copper/gold and uranium mine in South Australia bounced back after troubles at its acid plant in the previous quarter. Output jumped 32%, that was partly offset by preliminary work on upgrading the refinery’s crane, which is set to be physically replaced in the current March quarter.

BHP’s averaged realised iron ore price for the quarter jumped 41% to $US78.30 a tonne from $US55.62 a tonne for the December 2018 quarter and was slightly better than the $US77.74 a tonne average for the June quarter.

That was slightly better than the 37% rise enjoyed by rival Rio Tinto (its average price was $US79 a tonne).

Production from its mostly thermal coal operation in NSW fell 11%, partly because of a strategy to focus on higher quality products.

Smoke and dust from Australia’s bushfires reduced air quality at its coal operations which also affected December output.

“We are monitoring the situation and if air quality continues to deteriorate then operations could be constrained further in the second half of the year,” the company said.

Guidance for its 2020 energy coal production remained unchanged at between 15 and 17 million tonnes.

Output from the miner’s Queensland’s metallurgical coal mines (50% owned) was down 2% in the December half, although a stronger second half was expected to lift its overall performance.

The company’s average coking and thermal coal prices all fell sharply in the half-year and quarter.

In an update ahead of reporting its half-year results on February 18, BHP said it expects operating costs at its Escondida copper mine in Chile to be below guidance, exploration expenses to rise by $US231 million and the group is accounting for a further US$793 million exceptional item charge for the Samarco dam failure back in 2015.

BHP shares slipped 0.1% to $41.20.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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