BHP Group Reports Mixed Results in First-Half Production

BHP Group, the world's largest mining company, has announced its first-half production results for various commodities. While there have been declines in iron ore and metallurgical coal, other sectors such as copper, energy coal, and nickel have experienced growth. The company provided these updates in its second-quarter production report.

Iron Ore Production

During the first half of the year, BHP Group's iron ore production decreased by 2% to reach 129 million metric tons. However, the company maintains its guidance for the full year of FY24, which is expected to remain within the range of 254 million to 264.5 million tons.

The lower production at Western Australia Iron Ore can be attributed to the ongoing tie-in activity for the Rail Technology Programme and the effects of the continued ramp up of the Central Pilbara hub (South Flank and Mining Area C).

South Flank Expansion

Despite the challenges faced at Western Australia Iron Ore, the South Flank expansion project remains on track. It is anticipated that South Flank will achieve full production capacity of 80 Mtpa (100% basis) by the end of FY24. Furthermore, the planned tie-in of the Port Debottlenecking Project is set to be completed in CY24, following its commissioning on 7 December 2023.

Samarco Production

Samarco has witnessed an increase in production as a result of higher concentrator throughput. The company's production guidance for FY24 remains consistent, with expectations between 4 million and 4.5 million tons.

Copper Output

BHP Group recorded a 7% increase in total copper production, reaching 894,000 tons. The copper guidance for FY24 remains unchanged, expected to fall within the range of 1.720 and 1.910 million tons.

Escondida, in particular, demonstrated increased production due to a higher concentrator feed grade of 0.81% compared to the previous year (0.79% in HY23) and elevated concentrator throughput. It is projected that the concentrator feed grade for FY24 will range between 0.85% and 0.90%.

In summary, BHP Group's first-half production results showcase a mixed performance across various commodities. While iron ore and metallurgical coal experienced declines, copper, energy coal, and nickel demonstrated growth. The company remains optimistic about its future production and expansion plans.

Production Highlights

Pampa Norte

Production at Spence reached a new milestone, with a 4% increase to a half-year record of 127,000 tons. This growth was driven by improved concentrator throughput. While record concentrate production was achieved, there was a slight decrease in cathode production due to an anticipated decline in stacked feed grade. Modifications to the concentrator plant, which began in August 2022, are on track to be completed in FY24.

Cerro Colorado

After producing 11,000 tons for the period, Cerro Colorado entered temporary care and maintenance in December 2023.

Copper South Australia

The additional volumes from Prominent Hill and Carrapateena contributed to a significant increase in production of 51,000 tons at Copper South Australia. The successful integration of the Copper South Australia asset led to strong underlying operational performance, including record quarterly copper production at Carrapateena in Q2. The smelter performance at Olympic Dam was also impressive, supported by increased transfers of concentrate from Prominent Hill for processing into higher-margin cathode. Furthermore, Olympic Dam achieved record half-year gold production and sales.

Metallurgical Coal Output

Lower Production at Broadmeadow Mine

Lower production at Broadmeadow mine can be attributed to various factors. One major factor is the increase in planned maintenance activities across the asset during the period. Additionally, the extended longwall move and geotechnical faulting also had a significant impact on underground operations at Broadmeadow until early November.

Furthermore, production was affected by the need for increased prime stripping. This measure was taken to enhance value chain stability due to depleted inventory positions caused by extended weather impacts and labor constraints over recent years.

Revised Full Year Production Guidance

The full year production guidance has been adjusted and is now expected to be between 23 million and 25 million tons (equivalent to 46 million and 50 million tons on a 100% basis). It's important to note that this guidance does not include Blackwater and Daunia mines from the date of completion of the divestment, which is anticipated to occur on April 2, 2024. The previous production guidance was set at 28 million to 31 million tons (equivalent to 56 million and 62 million tons on a 100% basis), including Blackwater and Daunia.

Nickel Output Improvement

In terms of nickel output, there has been a notable increase due to improved performance and a shorter shutdown period at the Kalgoorlie Smelter. This offset the downtime experienced at the Kwinana Refinery. The production guidance for FY24 remains unchanged, ranging from 77,000 to 87,000 tons.

Challenges in the Nickel Industry

The nickel industry is currently facing various structural changes and is going through a cyclical low in realized pricing. Nickel West, like others in this sector, is not immune to these challenges. The company is actively optimizing its operations and exploring options to mitigate the impacts of the sharp decline in nickel prices.

As a response to market conditions, a carrying value assessment of the group's nickel assets is currently underway. Further updates will be provided when the financial results are released on February 20, 2024.