BHP posts iron ore record but sees challenges ahead
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BHP says inflation and global economic volatility are putting pressure on its business, but those challenges didn’t stop Australia’s biggest miner increasing production across the board and achieving annual records at its key iron ore operations and its Olympic Dam copper mine.
The global resources company said in an end of financial year production update on Thursday annual production of iron ore from its Western Australian operations hit a record 285 million tonnes and copper and gold production from its underperforming Olympic Dam mine reached a new peak.
BHP said production guidance was achieved for copper, iron ore, metallurgical coal and energy coal.
“Full-year production guidance was achieved for copper, iron ore, metallurgical coal and energy coal.
Nickel achieved revised guidance and finished in line with the lower end of original guidance,” BHP’s chief executive officer Mike Henry said.
The price of iron ore, one of Australia’s most lucrative exports, fell during the June quarter, driven lower by China’s slumping property market and falling demand from the country’s steel mills – which are by far the world’s biggest – and slower-than-expected global growth. After peaking at more than $US120 a tonne in March, it bottomed out at around $US98 in late May.
An expected seasonal jump in steel production – normally powered by China’s property market – failed to materialise.
“The growth in demand to date has not met expectations,” the Australian government’s chief economist said in its latest Resources and Energy Quarterly report, adding that restocking of the country’s iron ore and steel inventories is expected to provide some support for iron ore in the second half of this year.
BHP’s main rival Rio Tinto voiced concerns on Wednesday that weakness in China’s exports and the woes of its property sector are proving to be a drag on its economy.
Henry said BHP finished the financial year with a strong fourth quarter.
Iron ore production rose 9 per cent over the June quarter to finish the financial year 1 per cent higher than the previous year at 257 million tonnes. Higher volumes of copper concentrate from its joint venture Escondida mine in Brazil and stronger output at its South Australian operations boosted copper output by 9 per cent over the year to 1716 kilotonnes.
BHP is growing its copper and nickel reserves after it acquired OZ Minerals.
Troubles at Olympic Dam, where the mine has been plagued by reliability and operational issues, appear to be overcome after it produced record annual output of copper, gold and silver. The integration of OZ Minerals’ output is expected to lift copper production to between 310 and 340 kilo tonnes this financial year.
BHP sealed its $9.6 billion takeover of Oz Minerals in April.
Inflationary pressures are impacting the miner’s business, Henry said. “We remain laser-focused on safety and productivity to remain competitive. Competitiveness will be ever more important as we enter the new financial year and at a time when there are new challenges and opportunities to resource development and global economic volatility,” he said.
The transition to autonomous fleets at the company’s Queensland coal operations, Goonyella Riverside and Daunia, has helped offset significant wet weather in the state and maintained strong underlying performance.
“BHP’s portfolio is geared towards high-quality steelmaking and growth options in future facing commodities,” Henry said.
The company’s Jansen potash project in Canada is ahead of schedule and the miner is making strategic investments and exploration progress in copper and nickel prospects in Tanzania, Oak Dam in Australia, at the Filo del Sol project in Argentina and Chile, Ocelot in the United States, as well as Serbia and Peru, he said.
BHP shares are 0.5 per cent higher to $44.91 just before midday.
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