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BHP Group (BHP) Reports 3% Increase in Iron Ore Output in Q1
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BHP Group (BHP) released production details for the quarter that ended Sep 30, 2022 and affirmed its previously announced production and cost guidance for fiscal 2023. Iron ore production rose 3% year over year to 65.1 Mt (million tons) aided by improved performance at Western Australia Iron Ore (“WAIO”) on continued strong supply-chain performance and lower COVID-related impacts. BHP witnessed year-over-year improvement in output for copper and nickel, while metallurgical coal and energy coal were down.
Copper production increased 9% year over year to 410 kt in the quarter. Copper production at Escondida increased 4% year over year due to higher concentrator feed grade and 5% at Pampa Norte, reflecting the continued ramp-up of the Spence Growth Option. Olympic Dam copper production surged 68% year over year and Antamina copper production increased 4% aided by higher concentrator throughput.
Metallurgical coal production fell 1% to 7 Mt from the year-ago quarter. Production was impacted by wet weather in the quarter, mining higher strip ratio areas, a planned longwall move at Broadmeadow and planned wash plant maintenance at Blackwater, Goonyella and Saraji. Energy coal production plunged 38% to around 3 Mt due to wet weather and labor shortages, impacting stripping and mine productivity. Nickel production improved 16% year over year to 20.7 kt.
Affirms Fiscal 2023 Production & Cost Guidance
BHP’s iron ore production guidance for fiscal 2023 is 249-260 Mt. WAIO production is expected between 246 Mt and 256 Mt (278 Mt and 290 Mt on a 100% basis), indicating the tie-in of the port debottlenecking project (PDP1) and the continued ramp-up of South Flank.
BHP expects copper production within 1,635-1,825 kt, Production guidance for Metallurgical coal is 29-32 Mt, while for energy coal is 13-15 Mt. Nickel production is expected between 80 kt and 90 kt.
Unit cost guidance for WAIO remains at $18-$19 per ton. Escondida unit cost is estimated at $1.25-$1.45 per pound. BMA unit cost is expected between $90 and $100 per ton. Unit cost is expected to be higher in fiscal 2023, indicating inflation trends and higher research costs. These factors will be somewhat negated by lower exchange rates, gains from productivity improvements and cost-reduction initiatives.
Other Updates
Per management, the Jansen Stage 1 project is progressing per plan and it expects its first production in 2026, a year ahead of schedule. It is also exploring options to speed up Jansen Stage 2.
In line with its decarbonization efforts, BHP has recently entered into a renewable Power Purchase Agreement with Alinta Energy, which is expected to halve greenhouse gas emissions from the electricity used in its WAIO port facilities by the end of 2024. The parties have also entered a Memorandum of Understanding to develop Shay Gap Wind Farm with a planned capacity of 45MW.
Peer Performances
Vale S.A. (VALE - Free Report) reported iron ore production of around 89.7 million tons for the third quarter of 2022 (ended Sep 30, 2022), which was up 1% year over year and 21% sequentially on improved performance at Northern and Southern systems. VALE maintained its iron ore production guidance for 2022 at 310-320 Mt.
Vale’s Copper production for the quarter was up 7.4% year over year and 32.9% sequentially to 74.3 kt. Copper production guidance for 2022 remains at 270-285 kt. Production of nickel was up 71.5% year over year and 51.5% sequentially to 51.8 kt in the July to September period. VALE expects nickel production in 2022 between 175 kt and 190 kt.
Rio Tinto Group (RIO - Free Report) announced that its iron ore shipments in the third quarter of 2022 dipped 1% year over year to 82.9 Mt. Shipments came in 4% higher than the second quarter of 2022 despite two unplanned rail outages on the Yandicoogina and Gudai-Darri lines.
Iron ore production was at 84.3 Mt in the third quarter, up 1% year over year and 7% higher sequentially with continued commissioning and ramp-up of GudaiDarri and Robe Valley. RIO expects shipments to be at the low end of its previously stated guidance of 320 -335 million tons.
Price Performance
Image Source: Zacks Investment Research
BHP Group’s shares have fallen 15.1% over the past year compared with the industry’s decline of 19.5%.
Albemarle has a projected earnings growth rate of 427% for the current year. The Zacks Consensus Estimate for ALB's current-year earnings has been revised 19% upward in the past 60 days.
ALB’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average being 24.2%. The stock has gained around 4.7% in the past year.
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BHP Group (BHP) Reports 3% Increase in Iron Ore Output in Q1
BHP Group (BHP) released production details for the quarter that ended Sep 30, 2022 and affirmed its previously announced production and cost guidance for fiscal 2023. Iron ore production rose 3% year over year to 65.1 Mt (million tons) aided by improved performance at Western Australia Iron Ore (“WAIO”) on continued strong supply-chain performance and lower COVID-related impacts. BHP witnessed year-over-year improvement in output for copper and nickel, while metallurgical coal and energy coal were down.
Copper production increased 9% year over year to 410 kt in the quarter. Copper production at Escondida increased 4% year over year due to higher concentrator feed grade and 5% at Pampa Norte, reflecting the continued ramp-up of the Spence Growth Option. Olympic Dam copper production surged 68% year over year and Antamina copper production increased 4% aided by higher concentrator throughput.
Metallurgical coal production fell 1% to 7 Mt from the year-ago quarter. Production was impacted by wet weather in the quarter, mining higher strip ratio areas, a planned longwall move at Broadmeadow and planned wash plant maintenance at Blackwater, Goonyella and Saraji. Energy coal production plunged 38% to around 3 Mt due to wet weather and labor shortages, impacting stripping and mine productivity. Nickel production improved 16% year over year to 20.7 kt.
Affirms Fiscal 2023 Production & Cost Guidance
BHP’s iron ore production guidance for fiscal 2023 is 249-260 Mt. WAIO production is expected between 246 Mt and 256 Mt (278 Mt and 290 Mt on a 100% basis), indicating the tie-in of the port debottlenecking project (PDP1) and the continued ramp-up of South Flank.
BHP expects copper production within 1,635-1,825 kt, Production guidance for Metallurgical coal is 29-32 Mt, while for energy coal is 13-15 Mt. Nickel production is expected between 80 kt and 90 kt.
Unit cost guidance for WAIO remains at $18-$19 per ton. Escondida unit cost is estimated at $1.25-$1.45 per pound. BMA unit cost is expected between $90 and $100 per ton. Unit cost is expected to be higher in fiscal 2023, indicating inflation trends and higher research costs. These factors will be somewhat negated by lower exchange rates, gains from productivity improvements and cost-reduction initiatives.
Other Updates
Per management, the Jansen Stage 1 project is progressing per plan and it expects its first production in 2026, a year ahead of schedule. It is also exploring options to speed up Jansen Stage 2.
In line with its decarbonization efforts, BHP has recently entered into a renewable Power Purchase Agreement with Alinta Energy, which is expected to halve greenhouse gas emissions from the electricity used in its WAIO port facilities by the end of 2024. The parties have also entered a Memorandum of Understanding to develop Shay Gap Wind Farm with a planned capacity of 45MW.
Peer Performances
Vale S.A. (VALE - Free Report) reported iron ore production of around 89.7 million tons for the third quarter of 2022 (ended Sep 30, 2022), which was up 1% year over year and 21% sequentially on improved performance at Northern and Southern systems. VALE maintained its iron ore production guidance for 2022 at 310-320 Mt.
Vale’s Copper production for the quarter was up 7.4% year over year and 32.9% sequentially to 74.3 kt. Copper production guidance for 2022 remains at 270-285 kt. Production of nickel was up 71.5% year over year and 51.5% sequentially to 51.8 kt in the July to September period. VALE expects nickel production in 2022 between 175 kt and 190 kt.
Rio Tinto Group (RIO - Free Report) announced that its iron ore shipments in the third quarter of 2022 dipped 1% year over year to 82.9 Mt. Shipments came in 4% higher than the second quarter of 2022 despite two unplanned rail outages on the Yandicoogina and Gudai-Darri lines.
Iron ore production was at 84.3 Mt in the third quarter, up 1% year over year and 7% higher sequentially with continued commissioning and ramp-up of GudaiDarri and Robe Valley. RIO expects shipments to be at the low end of its previously stated guidance of 320 -335 million tons.
Price Performance
Image Source: Zacks Investment Research
BHP Group’s shares have fallen 15.1% over the past year compared with the industry’s decline of 19.5%.
Zacks Rank & Stocks to Consider
BHP currently carries a Zacks Rank #3 (Hold).
A better-ranked stock in the basic materials space is Albemarle Corporation (ALB - Free Report) which currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Albemarle has a projected earnings growth rate of 427% for the current year. The Zacks Consensus Estimate for ALB's current-year earnings has been revised 19% upward in the past 60 days.
ALB’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average being 24.2%. The stock has gained around 4.7% in the past year.