Shares in BHP Billiton recovered from an early fall yesterday in the wake of the release of the company’s latest production and sales report which revealed a small fall in iron ore output in the three months to September, but a sharp, 14% jump in copper production.
That surge in copper output made the fall reported by Rio Tinto on Tuesday look bad, but local investors overlooked that gain and the fact that it was made into a rising market.
The news for copper and the maintained outlook will be welcomed by shareholders at the company’s 2017 AGM today.
Ahead of that the company’s shares ended down half a per cent at $27.17 at after falling 1.1% in early trading.
Many investors and analysts preferred to concentrate on the performance of the company’s huge iron ore operations in the Pilbara region of WA.
There BHP reported iron ore production of 56 million tonnes in the three months ended September, down 3% year on year as the impact of a June fire at its Mt Whaleback screening plant and planned maintenance.
The losses offset improved mine productivity and increased volumes at its newish Jimblebar mine.
Total production was 64 million tonnes in the fiscal 2018 first quarter versus 67 million tonnes a year ago. BHP’s share for the quarter was 55.6 million tonnes.
On June 1 the company temporarily halted operations at its Whaleback due to a fire. Whaleback, near Newman.
Despite the fall, BHP obviously believes the shortfall can be made up in the next nine months and left unchanged its 2017-18 production guidance of 275-280 million tonnes of iron ore.
And it was a similar level of confidence shown in the copper business which continues to emerge as perhaps the second most important area of operations for the company. That is where it is spending more than $A3.5 billion on new mining and processing operations in Chile and South Australia over the next couple of years.
BHP said copper output was up 14% to 404,000 tonnes in the latest quarter from a year ago as production at Escondida, the world’s largest copper mine, ramped up from a strike earlier this year (Rio said earlier in the week that delays at Escondida had cost it production) and a heavy investment program in the past three years.
BHP left guidance for the metal unchanged at 1.7 million to 1.8 million tonnes for 2018. BHP also revealed a 75% jump in copper output at Olympic Dam is coming by 2019.
"Olympic Dam copper production increased by three per cent to 42 kt with first ore achieved from the high-grade Southern Mining Area in the September 2017 quarter. Copper production of 150,000 kt is expected in the 2018 financial year as a major smelter maintenance campaign is undertaken.
"The maintenance campaign commenced on 21 August 2017 and will be phased through to the December 2017 quarter. On completion, improved operating performance, coupled with higher ore grades from the Southern Mining Area, will underpin an expected increase in production to approximately 215 kt in the 2019 financial year.”
The price of copper has risen 27% this year to around $US7,00 a tonne. Rio Tinto lowered its outlook for mined copper production on Tuesday to between 460,000 and 480,000 tonnes and said production of the metal had slid 3% during the third quarter.
Petroleum production for the quarter slipped by 8% to 50 million barrels of oil equivalent in what was BHP’s weakest quarterly petroleum output since 2011. But that was due to a combination of lower yields from declining fields and the impact of hurricanes in the Gulf of Mexico in late August and September.
BHP said divestment of a small portion of the onshore Hawkville acreage was completed in the September 2017 quarter, with “ ork underway" to exit the remaining acreage.
BHP chief executive Andrew Mackenzie said in a mall comment in the statement that the performance in the first quarter would keep the company on track for its full-year volume growth target.
“Our performance in the first quarter keeps us on track to deliver seven per cent volume growth in the 2018 financial year.
“Our transition to lower-cost, high-return, latent capacity projects is delivering results, with first copper production achieved from the Los Colorados extension project at Escondida and Olympic Dam’s southern mining area during the quarter," he said.
“Major development work has commenced on the recently approved growth projects, Mad Dog Phase 2 and the Spence Growth Option, with both set to become operational as their respective markets in oil and copper rebalance.”
The company also revealed it had made an oil discovery in the Gulf Of Mexico in the Wilding – 2 well and a side tracked well from the original hole.
