BHP Lifts Iron Ore Output 7% But Flags Production Hit Ahead

By Glenn Dyer | More Articles by Glenn Dyer

BHP says it has made a solid start to 2020-21 with a solid lift in iron ore production in the September quarter and sales of 73.5 million tonnes at a time when the price remained above $US120 a tonne for 62% Fe fines delivered to northern China.

The company said in its September quarter production and sales report that iron ore output rose 7% from the 69 million tonnes in the September quarter of 2019.

BHP said, however, that iron ore production in the current December quarter will be affected by work linking its Mining Area C and South Flank projects in Western Australia’s Pilbara. Its full-year forecast of 276 million – 286 million tonnes was kept unchanged.

CEO Mike Henry said in a statement with the September quarter exploration and production report that the company has started the new financial year with a strong first quarter of safety and production performance.

“Group production rose two percent from a year ago driven by solid results in metallurgical coal and iron ore, our major growth projects made good progress, and we secured more options in copper, nickel and oil,” he said.

Sales rose 7.3% to 73.3 million tonnes in the quarter from 68.28 million in the same quarter a year ago. That will be an extra $US500 million plus in revenue for the quarter compared to a year ago.

It was down 3.7 million tonnes from the June quarter this year 9the final quarter for the 2019-20 financial year.

BHP’s West Australian iron ore business will get the first production from its huge South Flank expansion next year, the company said on Tuesday.

BHP’s petroleum production grew quarter on quarter by 1% to 27 million barrels of oil equivalent (MMboe). This was due to the first production from Atlantis Phase 3 and higher seasonal demand at Bass Strait, which was partially offset by lower volumes at Shenzi in the Gulf of Mexico due to planned maintenance, the impact of Tropical Storm Laura in the Gulf of Mexico, and weather impacts on the North West Shelf. off the Pilbara coast in WA.

This production was stronger than some analysts were expecting.

BHP’s copper production was also better than expected by the market. It delivered quarterly production of 413,000, which was flat quarter on quarter instead of being down by up 15% according to some market estimates. BHP’s Olympic Dam had its best quarter in five years (See separate story).

The company said the copper performance driven by strong concentrator throughput at Escondida, higher production at Olympic Dam, and a recovery in production at Antamina following a six-week COVID-19 related stoppage in the June quarter.

BHP’s coking (metallurgical) coal production was down 17% quarter on quarter, Energy Coal production fell 18%, and Nickel production fell 7%. The sharp fall in coking coal came as steel mills deferred purchases because of the downturn in demand for steel triggered by the continuing impacts of COVID-19.

BHP’s revealed that all production and unit cost guidance remains unchanged for the 2021 financial year, except for Cerrejón production guidance (In Colombia) which is under review due to an ongoing strike.

BHP continues to expect iron ore production of 244 million to 253million tonnes, copper production of 1,480million to 1,645million, and petroleum production of 95MMboe to 101MMboe.

BHP shares fell 1.6% to $35.90.

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.

View more articles by Glenn Dyer →