Australia-headquartered miner BHP has reported mixed production results for the half year ended December 2023, with its copper, energy coal and nickel businesses showing strong performance while metallurgical coal production fell sharply.
The group, which has a primary listing in the Australian Stock Exchange (ASX) and a secondary listing on the JSE, noted a 36% jump in energy coal production for the six-month period, copper and nickel production were up 7% and 4%, respectively, compared with the same period last year.
BHP runs operations in Australia, North America and South America.
In an operational update published on Thursday, CEO Mike Henry said BHP “has had a solid first half”.
“Western Australia Iron Ore production was up 5% quarter on quarter, while first half copper production rose 7% reflecting a record half at Spence [in northern Chile] and ongoing strong performance and additional tonnes at Copper South Australia. New South Wales Energy Coal had its best first half in five years,” said Henry.
Its metallurgical coal business in Australia (BMA), however, had a tough six months following significant planned maintenance and low starting inventories.
Half-year production for metallurgical coal was down 17% compared with the same period in 2023 — based on this production guidance for the 2024 financial year was cut sharply to between 23-million and 25-million tonnes from 46-million to 50-million tonnes. In the previous year the group produced 29-million tonnes.
Full-year (2024) production guidance ranges remained unchanged for all its other assets and BHP said following the 36% increase in energy coal production it now expected to achieve the upper end of the guidance range of between 13-million and 15-million tonnes.
Henry said the group was “evaluating options” at its Nickel West mine in Australia to mitigate the effects of a fall in nickel prices. Driven by oversupply concerns, the price of nickel has dropped more than 40% over the last year.
Nickel slump
Earnings for BHP’s nickel business, which accounts for less than 1% of the group’s total earnings, were down a huge 61% in the 2023 financial year.
BHP is the most valuable company on the JSE, worth about R2.8-trillion on the bourse.
The resources giant gave the JSE a big boost in 2022 when after conducting share consolidation it decided to remain listed on the JSE and the Australian stock exchange ahead of the London Stock Exchange (LSE).
Equity analysts at investment banking group Goldman Sachs are neutral on BHP’s performance for 2024. In a note to clients seen by Business Day, the analysts said fiscal risks existed with respect to the potential for higher (or lower) taxes and royalties, particularly in Chile and Australia, which have seen recent increases to royalty rates.
“We continue to believe BHP’s major opportunity and challenge is offsetting copper reserve depletion and grade decline in Chile from 2024/2025, believing it will need to invest in its vast reserve/resource base to maintain current copper production levels,” Goldman said.
“We expect that BHP will continue to rationalise the met coal [metallurgical coal] business, retaining the highest-quality assets and leading to declining production since we expect no new mines to be developed, noncore assets are possibly sold (for example, energy coal per BHP), and some existing operations potentially look to gradually move underground.”
With Kabelo Khumalo
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