Lending Association

BHP’s production reports: Mixed outlook for metals

Iron ore looks good, nickel faces challenges, coking coal struggles, thermal coal holds steady, and copper shines in BHP’s (ASX:BHP) December quarter and half-year production and sales reports.

According to BHP, the first half of the year has been solid operationally. The company maintained full-year guidance for iron ore, copper, and thermal coal but expressed concerns about nickel and lowered the outlook for its BMA coking coal business in Queensland, jointly owned with Mitsubishi.

BHP anticipates reduced metallurgical coal production for the year to June, estimating between 23 million and 25 million tonnes, a 17% decrease from the earlier projection of 28 million to 31 million tonnes. Consequently, unit costs for coking coal are expected to rise to $US110 to $US116 a tonne, up from last year’s range of $US95 to $US105 a tonne due to challenges faced by BMA, including planned maintenance and low inventories.

In Western Australia, BHP’s Nickel West business is under active optimization, and an assessment of asset value is ongoing after a 50% price drop in 2023, driven by increased supply from low-cost nickel businesses in Indonesia controlled by Chinese companies. BHP acknowledges the cyclical challenges in the nickel industry.

Nickel’s troubles have already led to the collapse of Panoramic Resources and the suspension of mining operations at various mines in Western Australia. IGO is also reviewing its Cosmos nickel mining operations.

In contrast, copper and iron ore are performing well, with BHP making a new discovery beneath its Olympic Dam mine in South Australia. Despite a 2.2% drop in second-quarter iron ore production, BHP maintains its guidance for June 30 with a capacity of 250 to 260 million tonnes.

First-half copper production increased by 7% to 894,000 tonnes, with BHP expecting production to be toward the top end of its guidance range for the year.

Additionally, BHP reported record gold production and sales at Olympic Dam and notable improvements in thermal coal production due to favorable weather conditions. The company still plans to close the NSW Energy Coal mine by 2030.

BHP is making progress on its growth agenda, including construction of the Jansen mine in Canada and the sanction of Jansen Stage 2, doubling planned potash production capacity. In South Australia, BHP integrated its Copper SA business successfully and identified attractive copper mineralization during exploration drilling beneath Olympic Dam.