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BHP Results: The Big Aussie chases production growth as iron ore, Olympic Dam hit records
Mining
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- BHP plots path to new iron ore record in FY24 after record 285Mt in FY23
- Olympic Dam also hits record as BHP integrates OZ’s South Australian copper mines
- MinRes ends China lithium plant deal and Evolution misses gold guidance
BHP (ASX:BHP) has followed rival Rio Tinto (ASX:RIO) in upping its iron ore output, hitting a fresh record of 285Mt of shipments in FY23 and planning to hit as much as 294Mt in FY24.
That is the upper end of its guidance range, which could come in as low as 282Mt, after BHP produced 72.7Mt on a 100% basis in the June quarter, up 10% at its WAIO business.
Olympic Dam also delivered record production levels of 212,000t, with BHP expecting to lift its copper output in South Australia 33-46% to 310-340,000t next year as it embeds OZ Minerals’ Prominent Hill and Carrapateena mines.
Overall copper output is expected to rise between 0-11% to 1.72-1.91Mt, with the Escondida mine in Chile to contribute 1.08-1.18Mt after delivering 1.0553Mt in FY23, including a 16% QoQ lift to 293Mt in the June quarter.
The Spence mine at Pampa Norte in Chile also delivered a record 240,000t in FY23, though Pampa Norte will be the biggest decliner across its portfolio in FY24, with volumes expected to fall between 13-27% to 210,000-250,000t.
BHP CEO Mike Henry said the fourth quarter was a strong one, but acknowledged the workplace deaths of Jody Byrne and Nathan Scholz at its Pilbara iron ore and Olympic Dam mines during the year.
“These tragic events underscore the absolute importance of safety and we are resolute in our commitment to eliminating fatalities and serious injuries at BHP,” he said.
“BHP finished the year with a strong fourth quarter, increasing annual production across the board and achieving annual records at WAIO, Olympic Dam and Spence.
“WAIO shipped record volumes on the back of productivity in its supply chain, rail network and car dumpers, while South Flank completed its deployment of autonomous haul trucks in May and is on track to ramp up to full production in the next 12 months.”
BHP’s met coal mines in Queensland, two of which are on the block, finished the year flat at 29Mt (58Mt on a 100% basis), with a 22% lift to 17Mt in the June quarter and are expected to produce between 56-62Mt in FY24, between 4% down and 7% up on this year.
Its Mt Arthur thermal coal mine in NSW’s Hunter Valley delivered 14.2Mt, up 21% to 4.8Mt in the June quarter, with identical guidance of 13-15Mt in FY24, while the Nickel West business in WA delivered 80,000t and has guidance of 77,000-87,000t in FY24.
BHP ramps up strategic investments and exploration
Henry meanwhile has noted BHP’s desire to ramp up strategic investments and exploration while it navigates tough global economic conditions.
He says the plan is to focus on safety and productivity.
“Inflationary pressures impacted our business in the year, and we remain laser focused on safety and productivity to remain competitive. Competitiveness will be ever more important as we enter the new financial year and at a time when there are new challenges and opportunities to resource development and global economic volatility,” he said.
“BHP’s portfolio is geared towards high quality steelmaking and growth options in future facing commodities. The Jansen potash project in Canada remains ahead of plan and studies for Stage 2 are progressing.
“Through the year, BHP made strategic investments and exploration progress in copper and nickel prospects globally, including Kabanga in Tanzania, Oak Dam in Australia, Filo Mining with the Filo del Sol project in Argentina and Chile, and Ocelot in the United States, as well as Serbia and Peru.”
BHP lifted exploration expenditure 37% to US$350m in FY23, work which included the discovery of the Ocelot copper porphyry in the United States.
Work is also ongoing at Oak Dam, a major new IOCG discovery near Olympic Dam in South Australia, to deliver a maiden resource with a 150-room camp established and drill rigs ramped up from nine to 11.
BHP has submitted an application to convert its exploration licence into a retention lease to build an early access decline, while drilling at Olympic Dam has begun to find new sources of the copper, uranium and gold enriched ore between 900m and 1500m deep with nine surface rigs whirling.
BHP (ASX:BHP) share price today:
Elsewhere in large cap land
Mineral Resources (ASX:MIN) has dumped plans to take a stake in two lithium conversion plants in China with its Wodgina JV partner Albemarle, stating its preference to build downstream capacity in Australia.
It has set up its own office in Ningbo in China to market spodumene concentrate, which it will do once a deal to convert Wodgina spodumene by toll-treating with Albemarle is complete.
Chris Ellison’s miner will also pick up US$380-400 million from Albemarle to sell its 15% stake in the first two trains at Albemarle’s Kemerton lithium hydroxide plant near Bunbury.
The deal will enable MinRes to formalise the lift in its stake at Wodgina from 40% to 50%, where it will be to operator of the mine.
A preliminary study from MinRes on an Australian-based lithium chemical plant will be completed in the September Quarter.
“These changes are a win-win for both parties, with MinRes and Albemarle remaining great joint venture partners in the world-class Wodgina lithium mine, while maximising flexibility to focus on the strengths of our businesses,” MinRes lithium CEO Josh Thurlow said.
“It’s a testament to our working relationship that we were able to negotiate mutually beneficial outcomes that deliver value for both sets of investors.
“For MinRes, we’ve unlocked value from our non-integrated Kemerton processing facility, which will provide flexibility to continue expanding our hard rock assets and developing our own integrated lithium conversion assets in Australia and abroad.”
Meanwhile, Evolution Mining (ASX:EVN) revealed a 1% miss in gold production on its guidance of 660,000oz at $1390/oz, producing 651,155oz at $1450/oz in FY23.
The June quarter was comfortably EVN’s worst of the year, delivering 159,743oz of gold and 7728t copper at AISC of $1912/oz and all in costs of $2832/oz, a margin of negative $63/oz.
It said the impact of a major wet weather event that temporarily stalled the Ernest Henry copper-gold mine in Queensland was a $160m hit on cash flow.
EVN delivered $944m in operating mine cash flow, with its biggest highlight a record at its biggest gold asset the Cowal mine in New South Wales, which delivered 276,314/oz in FY23.
It is expected to deliver another 15% increase in FY24. EVN expects to lift gold production in FY24 by 17% to 770,000oz and copper output by 5% to around 50,000t at AISC of $1370/oz.
“Our focus during the quarter has been on ensuring we are set up to deliver on the plans outlined at our Investor Day, aimed at improving cash flows and achieving returns at a lower rate of capital intensity. Importantly, Evolution is entering a period of increased cash generation as the Group transitions to higher production rates and margins,” MD Lawrie Conway said.
“As we move into FY24, we have a strong pipeline of quality projects that will drive increased margins and extend the mine life of our assets. This includes the drilling results released today which further enhance the Ernest Henry mine extension project, and are expected to drive further growth of the Mineral Resource.
“These will be incorporated in the updated Mineral Resource estimate to be
completed in the September quarter.”
It comes after Northern Star Resources (ASX:NST) was sold off by investors yesterday as it revealed FY24 guidance short of consensus forecasts.
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