PERTH (miningweekly.com) – Major BHP has flagged higher costs at its Pilbara iron-ore and its Queensland and New South Wales coal operations, as well as at its copper operations at Escondida, in Chile.

The miner on Thursday reported strong production rates for iron-ore, copper and metallurgical coal during the half year ended December, while production of energy coal and nickel both declined, compared with the previous corresponding period.

Iron-ore production reached a record 132-million tonnes in the half-year ended December, up 2% on the previous corresponding period, while production in the three months to December was up 3% on the previous quarter, to 66.9-million tonnes.

“BHP delivered safe and reliable operating performance in the first half of the 2023 financial year. Employees and contractors across BHP continued to prioritise safety, resulting in the fourth consecutive year without a fatality,” said CEO Mike Henry.

“Western Australian Iron Ore (WAIO) delivered record production for the half-year through strong supply chain performance, supported by the ongoing ramp-up at South Flank. Copper production at Escondida rose despite road blockades in Chile in the December quarter and the Spence Growth Option (SGO) continued to ramp up, while Olympic Dam’s ongoing smelter performance saw near-record material processing and record gold production. In Queensland, coal production was again impacted by heavy rainfall. As foreshadowed, we are seeing the impact of inflation across our global supply chains and continue to focus on productivity and controllable costs.”

Copper production in the half-year reached 834 400 t, up 12% on the previous corresponding period, while production in the December quarter increased by 3% on the previous quarter, to 424 300 t.

Escondida copper production increased by 5% to 511 000 t primarily owing to higher concentrator feed grade in the December half, which was partially offset by lower throughput and the impact of road blockades across Chile in the December quarter, which reduced availability of some key mine supplies.

BHP noted that Pampa Norte copper production increased by 8% to 147 000 t reflecting the continued ramp-up of the SGO. The SGO plant modifications started in August 2022 and are planned to be completed in the 2023 calendar year. Expected capital expenditure for the works remains unchanged at approximately $100-million, and further studies are ongoing for additional capacity uplift at SGO.

Olympic Dam copper production increased by 138% to 104 000 t primarily as a result of the major smelter maintenance campaign in the prior period, BHP told shareholders. Continued strong concentrator and smelter performance resulted in near record material milled and concentrate smelted in the half-year. Record gold production was also achieved in the half-year as a result of debottlenecking initiatives implemented in the prior year.

At Antamina, copper production decreased by 3% to 72 000 t reflecting lower copper head grades partially offset by higher throughput. Zinc production was flat at 63 000 t reflecting lower zinc head grades offset by higher throughput.

BHP during the December quarter entered into a scheme implementation deed with copper miner Oz Minerals to acquire that company at a cash price of A$28.25 a share, valuing Oz Minerals at A$9.6-billion.

“During the quarter, we continued to progress a number of growth pathways to shape our portfolio toward future-facing commodities and reduce our operational emissions. In December 2022, BHP’s scheme implementation deed to acquire 100% of Australian copper producer Oz Minerals received unanimous support from the Oz Minerals board ahead of a shareholder vote in the coming months,” said Henry on Thursday.

Meanwhile, metallurgical coal production in the half-year to December was up 5%, to 13.6-million tonnes, and reached 7-million tonnes in the December quarter, an increase of 4%.

Production from the BMA operations, in Queensland, increased by 5% to 14-million tonnes, or 27-million tonnes on a 100% basis, driven by an improvement in underlying truck productivity, in particular for the autonomous fleets following completion of the transitions at Goonyella and Daunia, higher yields as a result of mine sequencing, as well as the reduced impact of labour constraints relative to the prior period. This was partially offset by the impact of significant wet weather during the December 2022 half-year.

BHP said on Thursday that the Queensland government’s decision to raise coal royalties to the highest maximum rate in the world made Queensland uncompetitive and puts investment and jobs at risk.

“We see strong long-term demand from global steelmakers for Queensland’s high quality metallurgical coal, however, in the absence of government policy that is both competitive and predictable, we are unable to make significant new investments in Queensland. This increase to royalties will impact the local businesses, suppliers and communities in Central Queensland where we operate,” the miner warned.

Meanwhile, energy coal production for the half-year declined by 24%, to 5.5-million tonnes, but increased by 9% in the December quarter, to 2.9-million tonnes.

The New South Wales energy coal operations were impacted by record wet weather conditions, continued labour shortages, planned wash plant maintenance during the December 2022 quarter and an increased proportion of washed coal. Higher quality coals made up approximately 90% of sales, compared to approximately 80% in the December 2021 half-year.

Nickel production for the half-year declined by 2%, to 38 400 t, and by 14% in the December quarter to reach 17 700 t.

Nickel West production decreased by 2% to 38 000 t, reflecting the slower than expected ramp-up of the refinery following planned smelter and refinery maintenance during the December 2022 quarter.

Production guidance for the 2023 financial year has remained unchanged across the board, with iron-ore production targeted at between 249-million and 260-million tonnes, and copper production at between 1.63-million and 1.82-million tonnes.

BHP’s share of metallurgical coal production is targeted at between 29-million and 32-million tonnes, while energy coal production is targeted at between 13-million and 15-million tonnes, and nickel at between 80 000 t and 90 000 t.

BHP has warned though that unit costs for the December half-year at Escondida were expected to be towards the upper end of the full-year guidance, while unit costs at the WAIO, BMA and New South Wales coal assets would be above the full-year guidance.

For the 2023 financial year, unit costs at WAIO and Escondida were also tracking towards the upper end of the full year guidance, while unit costs for BMA have increased to between $100/t and $150/t, reflecting full-year volumes tracking to the low end of production guidance to significant wet weather, inventory movements and inflationary pressures.

Unit cost guidance for New South Wales energy coal operations has been increased to between $84/t and $91/t, reflecting production impacts from record wet weather, inflationary pressures and price-linked logistics costs.