BHP’s iron ore production jumps 8 per cent on strong Chinese demand

23-Oct-2018

Record production at BHP’s Jimblebar mine in the Pilbara coupled with strong Chinese demand for high grade iron ore saw the world’s biggest miner’s first-quarter production jump 8 per cent.

The lift didn’t extend to the mining giant’s other commodities however with maintenance and fires hampering production at copper and nickel operations.

“We are on track to meet guidance for the 2019 financial year across our commodities, except copper where we have reduced production guidance slightly following outages at Olympic Dam in Australia and Spence in Chile,” BHP chief executive Andrew Mackenzie said.

BHP’s iron ore output rose to 69 million tonnes during the September quarter, compared with 64 million tonnes a year ago. That was in line with UBS’s estimate of 68.8 million tonnes.

In its operational review the miner said the boost in production was supported by record production at its Jimblebar mine in Western Australia’s Pilbara and improved reliability across its rail network and port operations.

The Samarco iron ore operations remained suspended in Brazil following the failure of the Fundão tailings dam and Santarém water dam in 2015. BHP maintained its fiscal 2019 guidance of 273 million to 283 million tonnes of iron ore.

China’s iron ore imports this year have held steady despite a deepening trade dispute with the United States. China buys just over half of Australia’s commodity exports.

BHP’s iron ore results were more positive than its main Pilbara competitor Rio Tinto, which took a hit to production following a worker death and maintenance programs.

Australian nickel production under the company’s Nickel West moniker was down 8 per cent at 21.4 kilotonnes after a fire at its Kalgoorlie smelter in September.

BHP said the smelter returned to operation on October 1 and is expected to ramp up to full capacity from early November 2018.

“Planned maintenance at the Kwinana refinery was brought forward to align with the smelter outage,” the company said.

Nickel guidance for the 2019 financial year remained unchanged and is expected to be broadly in line with last year.

Copper supply under the microscope

BHP trimmed its copper production forecast by about 3 per cent to a range of 1.62 million tonnes to 1.71 million tonnes, blaming reduced production at its Spence and Olympic Dam mines in Chile and South Australia, respectively.

The Olympic Dam mine was closed for repairs and is expected to resume operations by the end of this month, while operations at Spence continue at partial capacity following a fire in September.

Operations at Spence are expected to reach full capacity during December, the company said.

The outages also hurt production during the quarter, with copper output flat at 409,000 tonnes.

CBA mining and energy commodities strategist Vivek Dhar said the copper announcement was interesting and put the lens on global supply disruptions of copper.

“It was such a big thing last year and this year its not really been evident, so it kind of puts that lens back on supply disruption and are we going to see it again,” he said.

“Not only is it just BHP talking. We know (Chilean copper miner) Codelco is suspending operations for a number of weeks at two of its smelters in Chile.

“It kind of chips at that narrative a bit so people start looking at supply.”

Source: THE SYDNEY MORNING HERALD