(BHP - Free Report
) released production details for the first half of fiscal 2020 (ended Dec 31, 2019) and also stated that it is maintaining production and cost guidance for fiscal 2020. The company reported year-over-year growth in copper and iron ore production during the period under review. However, petroleum, metallurgical coal, energy coal and nickel production came in below the prior-year levels.
In the first half of fiscal 2020, the company’s total iron ore production improved 2% to 121 Mt compared with the prior-year comparable period. Total petroleum production was 57 MMboe (thousand barrels of oil equivalent) for the period under review, down 9% year over year. Total copper production improved 7% year over year to 885 kt in the first half of fiscal 2020.
Metallurgical coal production was down 2% to 20 Mt in the period under review compared with the prior year. Energy coal production in the first half of fiscal 2020 was 12Mt, down 12%.
Nickel production was down 11% year over year at 35 kt as operations thanks to the major maintenance shutdowns at the Kwinana refinery and the Kalgoorlie smelter, and planned routine maintenance at the concentrators in the second quarter of fiscal 2020. Total nickel production is anticipated to remain unchanged in fiscal 2020 from fiscal 2019 levels.
Fiscal 2020 Production Guidance Reaffirmed
In fiscal 2020, BHP Group expects to produce between 242 and 253 Mt of iron ore taking into account a stronger second-half performance. The company’s petroleum production guidance for fiscal 2020 is at 110-116 MMboe. Volumes are anticipated to be towards the lower end of the guidance range. Guidance for fiscal 2020 copper production is at 1,705-1,820 kt. Production guidance of Metallurgical coal for fiscal 2020 remains unchanged at 41-45 Mt. The company expects a strong performance in the second half of the fiscal. Guidance for fiscal 2020 energy coal production remains unchanged at 24-26 Mt.
Fiscal 2020 Cost Guidance Stays Put
Conventional Petroleum unit cost is projected at $10.50-11.50 per barrels of oil equivalent (boe) for fiscal 2020, up 0-9% over fiscal 2019. Escondida unit cost is projected at $1.20-$1.35 per pound, reflecting a rise of 5-18% over fiscal 2019. Western Australia Iron Ore costs are estimated at $13-14 per ton, which reflects a decline of 1% to 8% over the prior fiscal. Queensland Coal unit cost for the fiscal is expected at $67-$74 per ton compared with $69.44 per ton in fiscal 2019. Cost at New South Wales Energy Coal is projected at $55-61 per ton.
Six Major Projects on Track
As of Dec 31, 2019, BHP had six major projects under development in petroleum, copper, iron ore and potash. These projects have a combined budget of $11.4 billion over the life of the projects.
In December 2019, BHP and Woodside signed a non-binding Heads of Agreement to progress the Scarborough gas development.
Update on Samarco
BHP has approved $44 million for the restart of operations at Samarco, which had been suspended four years ago following a deadly dam collapse. The funding will be utilized for construction of a concentrator over the next year, following which operations will be resumed. BHP and Vale S.A. (VALE - Free Report
) each hold a 50% interest in Samarco. The mine, which had an annual production of 25 million tons of iron, will initially produce 7-8 million tons. It is projected to increase thereafter to 14 to 16 million within six years.
In December 2019, BHP agreed to fund $793 million in financial support for the Renova Foundation and Samarco.
Over the last year, BHP Group’s shares gained 19.5%, outperforming the industry’
s rally of 16.4%. BHP Group’s strong cash flow and its focus on lowering debt are likely to increase efficiency. It is making operations more efficient on the back of smarter technology adoption across the entire value chain. With elevated iron ore prices and the upbeat production numbers, BHP is poised well to deliver improved results.
Other Stocks to Consider
Some other top-ranked stocks in the same industry include Osisko Gold Royalties Ltd (OR - Free Report
) and Pretium Resources Inc. (PVG - Free Report
) , each sporting a Zacks Rank of 1, at present.
Osisko Gold has a projected earnings growth rate of 15.96% for the current year. The company’s shares have gained 5.8% over the past year.
Pretium Resources has an estimated earnings growth rate of a whopping 107% for the ongoing year. Its shares have appreciated 58.7% in a year’s time.
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