BHP did much better in its key iron ore business than rival Rio Tinto did, despite having to battle the impact of a surge in Covid infections and associated labour shortages in WA which also hit its nickel operations.
The world’s biggest miner also singled out Covid as a major factor in forcing it to cut its quarterly copper and nickel output.
While BHP’s key iron ore division managed to ship 67.1 million tonnes of iron from its Pilbara mine, slightly up from the 66.03 million tonnes in the March quarter in 2021, overall shipments were 8.3% lower compared to the December quarter as Covid infections across the entire WA mining sector surged as the state relaxed its fortress approach to trying to keep the virus at bay.
BHP delivered iron ore production of 58.7 million tonnes. This was flat quarter from a year but means that year to date production remains down 10% which is due to the temporary labour constraints caused by Covid, train driver shortages, and planned maintenance activities at the iron ore mines and port. This was partially offset by record production from the MAC hub with the continued ramp up of the newish South Flank mining operation.
Investors didn’t like the update and dropped the shares 3% to $50.70.
BHP CEO Mike Henry said the labour squeeze is likely to persist into the coming months.
“Market volatility and inflationary pressures have increased further as a result of the Russian invasion of Ukraine. We continue our work to mitigate cost pressures through a sharp focus on operational reliability and cost discipline.”
“While we expect conditions to improve during the course of the 2023 calendar year, we anticipate the skills shortages and overall labour market tightness in Australia and Chile to continue in the period ahead,” he said in yesterday’s March quarterly report.
BHP maintained its iron ore production guidance for fiscal 2022 financial, with output expected to come in between 246 million tonnes and 255 million tonnes.
However, it warned that it expects production in the current June 2022 quarter will be hit by “continued COVID-19 related absenteeism as Western Australia approaches anticipated peak case numbers, and planned car dumper maintenance.”
BHP’s copper production came in at 369,700 tonnes, up 1%. This was driven by higher volumes at Olympic Dam following the completion of planned smelter maintenance campaign, which was partially offset by lower volumes at Escondida due to COVID-19 workforce impacts and public road blockades following social unrest. Year to date copper production is now down 10%.
“Our Chilean assets experienced a challenging operating environment in the March 2022 quarter due to a reduction in our operational workforce as a result of a significant increase in COVID-19 cases in Chile, particularly the Omicron variant, and the mitigation measures implemented,” BHP said.
Nickel production slipped by 13% to 18,700 tonnes due to the impacts of COVID-19 related labour absenteeism and workforce shortages in its Nickel West business in WA the March 2022 quarter. This means that year to date nickel production is also down 13%. Temporary labour constraints are also to blame.
Besides the unchanged production guidance for the 2022 financial year for iron ore, BHP said it was also maintaining the forecasts for metallurgical coal and energy coal.
“Full year total copper production guidance has been lowered to between 1.570 million and 1.620 million tonnes reflecting lowered production guidance for Escondida.
“Full year nickel production guidance has been lowered to between 80,000 and 85,000 due to COVID-19 related labour constraints.
Full year unit cost guidance for WA iron ore, Escondida copper and Queensland Coal remains unchanged. BHP said that amid record high prices, its Queensland metallurgical coal business saw a 20% rise to 10.6 million tonnes, which means year to date production is now down only 2%.
Full year unit cost guidance for NSW Energy Coal (NSWEC) has been increased to between $US76 and $US81 a tonne, “reflecting a targeted increase in the proportion of higher quality coal to capture more value from the record high prices for higher quality thermal coal”.
BHP said the Canadian potash projects under development “are tracking to plan. The Jansen shaft project is 99% complete while Jansen Stage 1 activities continue to progress at the port, the Jansen site and for the underground mining systems.”
“The merger of our petroleum assets with Woodside has progressed and is set for completion in June 2022, while the divestment of our BMC (Queensland thermal and low-grade coking coal) business to Stanmore should complete in May 2022,” BHP added.
