Miner BHP hits near record iron ore production despite ‘Covid related labour constraints’
Mining giant BHP has achieved near record production in iron ore, despite being impacted by poor weather and labour restrictions on operations.
In half-year results ended 31 December 2021, the metals and petroleum firm reported it remained “fatality free” at its operated assets for the third consecutive year.
It has also reported rebounding profits from operations of $14.8bn, up 50 per cent while net operating cash flow has soared to $11.5bn.
High performance has been driven by disciplined capital allocation and a revised net debt target to between $5-15bn, allowing it to retain flexibility to allocate capital towards shareholder returns and future investment opportunities.
Net debt for the year has been recorded at $6.1 billion.
The Melbourne-based company said its production guidance for the 2022 financial year remains unchanged for iron ore, energy coal and nickel.
However, it said its full year total copper production was trending towards the low end of the guidance range. This was down to lower production guidance for Pampa Norte.
Metallurgical coal guidance was also lowered after “significant wet weather impacts and COVID-19 related labour constraints.”
BHP chief executive officer, Mike Henry, said: “BHP was fatality free at our operated assets for the third consecutive year. Our continuing focus on people and on operational reliability enabled us to achieve near record production in iron ore and to reduce the impacts of adverse weather and Covid-19 related labour constraints in our operations.”
The results follow BHP’s decision to drop its dual-listing, and leave the FTSE 100 on the London Stock Exchange, and maintain its Australian listing.
Henry was particularly pleased that the miner had kept a tight ship over expenses, while boosting proudction levels.
He explained: “Cost control remained strong across the business, in the face of a more inflationary environment. Unit cost guidance remains intact bar a change to metallurgical coal which is a function of the lowering of production guidance as a result of significant wet weather and in anticipation of Omicron headwinds in the early part of the second half of the financial year.”
Commenting on the results, Anthony de Ruijter, senior associate at Third Bridge, said that automation could result in unit cost benefits of 5-10 per cent longer term.
He also pointed to the possibility of improved shipment capacity at a key port as a way of boosting production levels further.
He said: “Despite recent port approvals to increase BHP’s capacity to 330 million metric tons per annum, our experts don’t believe BHP will achieve a maximum capacity on a consistent basis in the near term. This is because BHP will likely face some challenges when maximising production output. These include difficulties around managing dust emissions at its Port Hedland operations and sequencing volume throughout its production lines.”