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Mining
The Christmas ham has been crapped away, new years’ resolutions are cooking away in the back of our minds waiting to be charred into oblivion and the meme stock you promised your family you’d sell just pulled you back in with an early year rally.
Yes, we’re well and truly into 2022 now. No more looking back because reporting season is upon us.
And to get us started will be the Behemoth and Leviathan of the ASX, Rio Tinto (ASX:RIO) and BHP (ASX:BHP).
Rio will be the first cab off the rank for the Monsters of Rock collective, reporting early tomorrow morning.
The company’s performance in recent years has been less than stellar despite the near record share prices and monster dividend payments it has issued over the past couple years powered by out of this world iron ore prices.
Rio has missed guidance with regularity and already dampened expectations for its full year results with a series of downgrades at its third quarter review last year.
The big question is whether, after reducing guidance from 325-345Mt to 320-325Mt during the year, Rio was able to power its way through the final quarter to hit its revised target. We’ll find out tomorrow.
Stockhead heard a rumour that ore from Rio’s new 43Mtpa Gudai-Darri mine, officially delayed to 2022 due to labour and supply chain issues, may have made it out to port late last year.
We asked Rio earlier this month and they told us any update would be in the quarterly operations review. Thanks.
Rio’s production costs in the Pilbara have also been rising in recent years, moving a few bucks a tonne of rivals BHP and Fortescue. Those will be watched closely.
Outside of its flagship iron ore business, questions are being asked about permitting and ESG issues at Rio’s Resolution copper JV with BHP in the USA, its Oyu Tolgoi copper-gold operation in Mongolia and the contentious US$2.4b Jadar lithium mine in Serbia (relations which have surely not been helped by Canberra’s tif with Serbian national hero Novak Djokovic).
BHP’s results are likely to be solid, with the company expected to remain on track to hit its relatively modest guidance of 278-288Mt of iron ore shipments for FY22.
It is expected that December will be a better quarter for BHP than the September quarter having seen off maintenance programs across a number of its divisions, notably in iron ore, coal, copper and nickel.
Keep your eyes and ears peeled for hints of inflation at its WA operations where massive labour shortages are being felt behind the WA covid border. BHP noted a shortage of train drivers had put the breaks on its iron ore business in the September Quarter.
The real fireworks come not on Wednesday but the day after on Thursday when shareholders in the British and Australian brands of BHP come together (digitally in Australia) to vote on the unification of the company.
It has run with two separate companies registered in the UK and Australia since BHP’s merger with Billiton in the early 2000s.
The company announced plans to collapse the structure last year, a move it thinks will make it more nimble to pounce on acquisitions particularly in the green metals space it has pivoted to since making the decision to part ways with its fossil fuels businesses a couple years ago.
The move would make BHP’s Australian listed business a $220 billion company and comfortably the largest on the ASX, making up around 10% of the ASX 200.
Despite complaints from some institutional investors who say the Australian shareholders are giving up more than the UK holders, it is likely to pass the 75% approval threshold given BHP’s board has the support of the large proxy advisors.
The second biggest gold miner on the ASX, Northern Star (ASX:NST) has traded down since its high profile merger with Saracen Mineral Holdings almost a year ago.
While the gold sector has struggled to appeal to investors in general over the past 12 months, over which time the $10.6 billion capped NST is down around 30%, issues containing costs at the Pogo mine in Alaska have been of concern.
With the bulk of its operations in WA however, including the famous Super Pit gold mine in Kalgoorlie, Northern Star will be closely watched for comments about labour issues and costs that will have broader implications across the industry.
CEO Stuart Tonkin is likely to face questions from analysts and media about the impact of the McGowan Government’s border closures and what WA’s impending reopening to the country on February 5 will mean for the gold sector.
It’s all about spodumene prices when it comes to Pilbara Minerals (ASX:PLS), who have turned the lithium market on its head with the prices paid for the EV powering material through their online Battery Material Exchange platform.
Pilbara Minerals has already flagged a hit to production guidance due to labour and supply chain issues last year.
The bad news is probably already out of the way and PLS is back in investors’ good books and setting virtually daily share price records. The $11.2 billion company closed at a new all time high of $3.76 today.
PLS has just come through contracting season for product from its Pilgangoora mine in the Pilbara, and should provide an opportunity for investors to get some gauge on where the super hot lithium market is at right now.
Like BHP, analysts don’t expect too many surprises from Fortescue’s (ASX:FMG) production numbers.
The company has made solid gains on costs and production in recent years and has become a consistent performer relative to its guidance.
As a pure play iron ore miner it is also simpler to follow than the diversified majors.
Having dipped late last year as iron ore prices tumbled, FMG’s share price has climbed back over $20 has been tracking in the direction of last year’s record highs amid both a rising iron ore market and enthusiasm about its green energy initiatives.
The latter is something analysts have been begging for more information on, saying the valuation of the green hydrogen focused Fortescue Future Industries in FMG’s current market cap can’t be justified by the maths.
There are a number of other talking points, including whether there will be further delays or blowouts at the Iron Bridge magnetite mine and the process for appointing CEO Elizabeth Gaines’ successor following news last year that she would be vacating the post she has held since late 2017.
Mining
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