BHP lowers copper, coal guidance

THE lengthy strike at Escondida and the impacts of Cyclone Debbie have weighed on BHP Billiton’s full-year outlook.
BHP lowers copper, coal guidance BHP lowers copper, coal guidance BHP lowers copper, coal guidance BHP lowers copper, coal guidance BHP lowers copper, coal guidance

Escondida, BHP Billiton

Kristie Batten

The 44-day strike resulted in a 23% drop in output at Escondida for the nine months to March 31 to 546,000 tonnes of copper.

BHP has lowered full-year group copper guidance to 1.33-1.36 million tonnes from 1.62Mt previously.

Guidance had already been lowered once this financial year from the original target of 1.66Mt.

Escondida is expected to produce 780,000-800,000t of copper, down from 1.02Mt.

Metallurgical coal guidance has also been lowered in the wake of Cyclone Debbie, largely as a result of damage to third-party rail infrastructure.

Met coal guidance for FY17 is now 39-41Mt, down from 44Mt.

However, five of BHP’s Queensland coal mines achieved record production for the first nine months of FY17.

Also achieving record production was BHP’s Western Australian iron ore division, despite an 11% drop in quarter-on-quarter to 53.57Mt.

Production for the nine months to March 31 was a record 171Mt, up 3%, or 199Mt on a 100% basis.

The company attributed the record to the commissioning of a new primary crusher and additional conveying capacity at Jimblebar, ongoing progress on the rail renewal and maintenance program, and productivity improvements.

Nickel West production was up by 5% to 59,900t as a result of debottlenecking.

RBC Capital Markets analyst Paul Hissey said it was a softer-than-expected quarter from BHP.

“Much of this was to be expected, with the industrial action at Escondida well documented and weather impacts on both the West (iron ore) and East (metallurgical coal) coasts of Australia previously flagged by Rio and FMG,” he said.

“Whilst reduced FY17 guidance at two of its 'pillars' (copper and metallurgical coal) should impact earnings, this may already be factored into the share price following Rio's announcement last week.” 

In the face of a strategy challenge from activist investor Elliott, BHP CEO Andrew Mackenzie reiterated that everything the company did was designed to create value.

“But we have more to do and we are not standing still. A simpler portfolio allows us to improve safety and operational performance more quickly with maintenance, project and geoscience centres of excellence spreading petroleum and minerals expertise across the group,” he said.

“We have significantly reduced the capital intensity of our growth options and changed our approach in shale to improve returns and lower risks on new investments.

“Our more focused approach in exploration is delivering results with three discoveries over the last 12 months and our new technology function will unlock further value.”

Minerals exploration for the first nine months of the year was US$110 million, with a focus on copper.

BHP shares closed 0.4% lower at A$23.94 on Monday.

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