Diversified resource firm BHP Group, which has cautioned against continued uncertainty in the global macro-economic framework, traded marginally weaker on the JSE despite lifting copper and iron ore production by 9% and 3%, respectively, for the quarter period to the end of September.
Shares in BHP traded 0.575% weaker at R443 in afternoon trade on the JSE yesterday, after CEO Mike Henry said the company was expecting uncertainty in the global economy to persist.
“We expect global macro-economic uncertainty in the short term to continue to affect supply chains, energy costs, labour markets and equipment and materials availability,” said Henry.
Despite these headwinds, BHP is poised to benefit from “global mega-trends of decarbonisation and electrification” because of its mineral portfolio and stronger balance sheet.
BHP has reached an agreement to supply its Western Australia Iron Ore port facilities with renewable electricity. This is expected to halve emissions from the electricity used at the port.
It also signed a memorandum of understanding with Tata Steel of India for collaboration on lowering emissions in steelmaking. BHP is ramping up efforts to cut emissions and to support decarbonisation programmes, it said.
During the quarter period under review, BHP lifted copper production by 9% to 410 kilotons compared to the same quarter last year. Strong concentrator throughput at its Escondida mine, as well as “record quarterly anode production at Olympic Dam” boosted its volume outturn.
The Western Australia Iron Ore unit raised production by 3% relative to the same period last year.
Production of other minerals such as nickel was also stronger by about 16% at 21 kilotons. This reflected the completion of planned maintenance across the supply chain in the prior period.
Although nickel, copper and iron ore output was higher during the quarter for BHP, the firm’s production of coal was depressed.
BHP said output of metallurgical coal from BMA was lower, heavily affected by wet weather conditions during the period under review. Ongoing labour shortages also weighed down output.
BHP said it battled “substantial rainfall and labour constraints” in its coal assets, with metallurgical coal output marginally lower compared to the previous year, BHP said.
“These impacts have been largely offset by an inventory drawdown, and the continued ramp up of autonomous haul truck fleets. The near tripling of top end royalties by the Queensland government remains a serious concern and threat to investment and jobs in that state,” the company said.
There is, however, strong long-term demand from global steelmakers for Queensland’s high quality metallurgical coal. But in the absence of competitive and predictable fiscal terms BHP said it would be “unable to make significant new investments” in Queensland.
The energy coal subdivision also recorded a 38% plunge in production hampered by “ongoing impacts of significant wet weather with more than three times the amount of rainfall than the prior year”, as well as an increased proportion of washed coal.
Despite this, “higher quality coals made up approximately 85% of sales compared to approximately 70% in the September 2021” quarter.
BUSINESS REPORT