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BHP maintains guidance for most commodities, targets 6% volume growth

The Escondida mine in Chile delivered higher volumes in the December half year.

The Escondida mine in Chile delivered higher volumes in the December half year.

18th January 2018

By: Donna Slater

Features Deputy Editor and Chief Photographer

     

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JOHANNESBURG (miningweekly.com) – Multinational miner BHP on Thursday kept its full-year production guidance unchanged for all commodities, except metallurgical coal, and said that it would achieve 6% volume growth in the 2018 financial year.

The miner reported higher iron-ore and copper production in the December quarter, increasing copper output by 20% year-on-year to 429 000 t and its iron-ore production by 3% year-on-year to 61.56-million tonnes.

December-quarter energy coal production also increased, while petroleum and metallurgical coal output slipped in the three months under review.

Total copper production rose by 17% in the December half-year to 833 000 t, owing to increased volumes from the Escondida mine, in Chile, and ramped up production from the mine’s Los Colorados Extension project. The strong half-year performance places the company on track to produce between 1.66-million tonnes and 1.79-million tonnes in the full year to the end of June 2018.

Iron-ore production remained flat in the half-year period at 117.14-million tonnes. BHP reported record production from its Jimblebar and Mining Area C, volumes of which served to offset planned maintenance and lower opening stockpile levels following the Mt Whaleback screening plant fire in June last year.

The group’s guidance for its Western Australian iron-ore operations remains unchanged at between 239-million tonnes and 243-million tonnes.

BHP also maintained its guidance for petroleum production, despite output falling by 6% year-on-year to 22-million barrels of oil equivalent in the December quarter and by 7% year-on-year to 45-million barrels of oil equivalent in the half-year period.

BHP’s coal operations delivered a mixed result, with metallurgical coal output falling by 9% year-on-year in the December quarter to 9.69-million tonnes, while energy coal output increased by 10% year-on-year in the same period to 7.30-million tonnes.

Half-year metallurgical coal output of 20.25-million tonnes was 4% below that of the corresponding period and resulted in the group lowering its guidance for coking coal to between 41-million tonnes and 43-million tonnes to reflect lower volumes at the Broadmeadow and Blackwater mines, which are plagued by geotechnical issues.

Energy coal production increased by 4% year-on-year in the six months under review to 14.03-million tonnes, as a result of increased output from New South Wales Energy Coal, which served to offset production impacts resulting from wet weather impacting production at the Cerrejón mine, in Colombia.

“The momentum we have built across the wider portfolio during the second quarter will flow through to an expected stronger second half operating performance,” said BHP CEO Andrew Mackenzie.

He added that a strong operating performance in the first half of 2017 had enabled the group to benefit from higher prices. The average realised copper price jumped by 26% to $3.20/lb in the December half-year period, when compared with the 2017 financial year.

The average thermal coal price was 16% higher at $87/t, while oil prices were up 13% to $54/bl over the same period.

IMPAIRMENTS AND TAX
Meanwhile, BHP said that it expects underlying earnings before interest and taxes in the second half of 2017 to include impairment charges in a range of $250-million to $350-million. The charge is mainly relating to ceasing to use conveyors at its Escondida mine, owing to the successful completion of the Los Colorados extension project.

Although currently being finalised, BHP’s adjusted effective tax rate for the second half of 2017 is expected to be below the full year guidance range of between 32% and 37%.

BHP also said that the new US tax law, which President Donald Trump signed in December, would give rise to an exceptional item in the December 2017 half-year results. However, longer-term the lower US corporate income tax rate should benefit the group’s US attributable profits.

Edited by Mariaan Webb
Creamer Media Senior Deputy Editor Online

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