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BHP remains confident in production outlook

BHP (ASX:BHP) is confident it is heading for a solid production and sales performance for most of its portfolio by June. The company said on Thursday it remains on track to meet copper, iron ore, and energy coal production for the year. However, coking (metallurgical) coal guidance has been trimmed after the death of a worker at a central Queensland mine. BHP is still working out what to do with its Nickel West business and expects to be ready to make an announcement later this year. Iron ore is the key commodity for BHP and its major focus. It said on Thursday it had maintained its full-year iron-ore production guidance as third-quarter volumes edged higher compared with a year ago but were cut 7% compared with the final quarter of 2023 because of weather and other constraints.

BHP on Thursday said it produced 61.5 million tonnes of iron ore in the three months through March, up 3% from the first quarter of 2023. The latest quarter contained an extra day in February because of the leap year. It blamed heavy rainfall (which impacted other areas of WA’s huge mining sector), work on its rail infrastructure, and a bushfire for the decline in output compared with the December quarter (its second financial year quarter).

BHP, the world’s third-biggest producer of iron ore behind Rio Tinto and Vale of Brazil, maintained its June 30 guidance for iron-ore output of between 254 million and 264.5 million tonnes. It said that output from its Samarco joint-venture with Brazil’s Vale SA would be at the upper end of its 4.0 million-4.5 million tonnes guidance range. The company produced 6% more metallurgical coal than in the December quarter. Quarterly production of that commodity totaled 6.0 million tonnes, and BHP lowered its annual guidance to 21.5 million-22.5 million tonnes after production at one of its mines was halted for more than three days following the death of a worker in a vehicle incident.

BHP, which this month completed the sale to Whitehaven Coal of two metallurgical coal mines it had jointly owned with Japan’s Mitsubishi, raised its metallurgical coal unit cost guidance to US$119-US$125 a tonne, from US$110-US$116 a tonne because of lower throughput. BHP said quarterly copper production jumped 7% to 465,900 tons, underpinned by increased production from its biggest operations, especially the emerging South Australian copper operation based on Olympic Dam and the two mines brought over in the takeover of Oz Minerals last year.

BHP said in Thursday’s release that it saw “Increased copper production driven by record production at Spence in Chile, strong operational performance at Copper South Australia (and the contribution from Prominent Hill and Carrapateena), and improved performance and grade at Escondida, also in Chile. With the two mines from Oz Minerals onboard, Copper South Australia lifted production 49%. BHP said it had its best-ever mining performance at Olympic Dam as well. BHP operates and has a majority stake in Chile’s Escondida operation (where production rose 7%), the world’s largest producer of copper concentrates and cathodes. Rio Tinto is the main minority shareholder.

In a statement with the report, BHP CEO Mike Henry said the company remains “on track to meet copper, iron ore, and energy coal production for the year.” “Copper volumes have increased by 10 per cent reflecting strong performance and additional tonnes from Copper South Australia, record year-to-date performance from Spence, and improved grades and production at Escondida,” he said. “Western Australia Iron Ore, the lowest-cost iron ore producer globally, delivered another consistent period of production despite heavy rainfall. We continue to invest in improvements to our rail and port operations, which are essential for growth in the medium term to 305 million tonnes per annum and beyond.

“At our BMA metallurgical coal operations in Queensland, significant wet weather including the impact of two tropical cyclones and operational challenges impacted production and unit costs, and we have revised guidance for the year. “We successfully completed the sale of the Blackwater and Daunia mines on 2 April for a total of up to US$4.1 bn (100%).

“In Canada, the Jansen Stage 1 project remains ahead of its initial schedule and is now 44 per cent complete. In Western Australia, we expect to announce a decision on the future of our nickel business in the coming months, where efforts to optimize operations and preserve value are underway.”