BHP Group's (BHP) FY23 Iron Ore Production Increases 1% Y/Y
BHP Group’s BHP iron ore production improved 1% year over year to 257 Mt in fiscal 2023 (ended Jun 30, 2023). Record levels were reported at the Western Australia Iron Ore (WAIO), courtesy of strong supply-chain performance, including higher car dumper utilization and improved rail performance.
Fiscal 2023’s production level was near the top-end of the company’s guidance of 249-260 Mt. BHP also delivered on its targets for copper, metallurgical coal and energy coal. Nickel production matched the lower end of BHP’s expectations.
Copper Output Up 9% in FY23: Total copper production in fiscal 2023 rose 9% year over year to 1,717 kt in fiscal 2023. BHP’s guidance for copper production for the fiscal was within 1,635-1,825 kt.
Copper production at Escondida increased 5% year over year due to higher concentrator feed grade. This was somewhat offset by lower throughput and the impact of road blockades across Chile in the December 2022 quarter.
Copper output at Pampa Norte was up 3%, reflecting a record output of 240 kt at Spence. Production from Copper South Australia was 232 kt. Olympic Dam’s copper production delivered a record output as a result of continued strong concentrator and smelter performance following the major smelter maintenance campaign carried out in the prior year. Antamina copper production dipped 8% as higher throughput was offset by lower grades.
FY23 Nickel Production Up 4%: Nickel production rose 4% year over year to 80 kt during fiscal 2023. Higher proportion of concentrate and matte products and inventory drawdowns aided the improvement. However, this was partially offset by the slower-than-planned ramp up of the refinery following maintenance in the December 2022 quarter and a heavy rain event at the Mt Keith operations in early April 2023 which affected the mine progression. The company had provided guidance for nickel production between 80 kt and 90 kt for fiscal 2023.
Energy Coal Up, Metallurgical Coal In-Line: Energy coal production was up 3% year over year to 14.2 Mt in fiscal 2023, well within the company’s guided range of 13Mt to 15 Mt. Improvement in weather conditions in the second half of the year and higher truck productivity aided the performance.
Metallurgical coal production was 29 Mt, flat compared with the prior fiscal. Gains from truck productivity at Goonyella and Daunia, following the transition to autonomous fleets, were offset by the negative impact of wet weather in the first three quarters.
Prices Decline Barring Nickel: Average realized prices for copper, iron ore and metallurgical coal products were down 12%, 18% and 22% year over year in fiscal 2023. Average realized prices for nickel were up 3% while thermal coal prices gained 9%.
Update on FY23 Costs: BHP faced inflationary pressures through the year and will provide further details in its upcoming results (to be announced on Aug 22, 2023). The company has meanwhile stated that for fiscal 2023, unit costs at Escondida and WAIO are expected to be toward the upper end of guidance ranges. Unit costs at New South Wales Energy Coal (NSWEC) will be in line with the guidance while BHP Mitsubishi Alliance (BMA) are expected to be slightly above the recent guidance range.
BHP’s unit cost guidance for fiscal 2023 for WAIO is $18-$19 per ton. Escondida unit cost is estimated at $1.25-$1.45 per pound. NSWEC unit cost guidance was $84-$91 per ton. BMA unit cost is expected in the range of $100 to $105 per ton.
FY23 Production Guidance
BHP’s iron ore production guidance for fiscal 2024 is 254-264.5 Mt. WAIO's production is expected to be between 250 Mt and 260 Mt (282 Mt and 294 Mt on a 100% basis).
BHP expects copper production within 1,720-1,910 kt in fiscal 2024. Production guidance for metallurgical coal is 28 -31 Mt. The production guidance for energy coal is 13-15 Mt. Nickel production is expected to be between 77 kt and 87 kt.
Other Updates
In May 2023, BHP completed the acquisition of OZ Minerals Ltd. This takeover will significantly enhance its exposure to future-facing commodities while adding attractive synergies.
The Jansen project is on track according to plans and BHP is working toward its first production in 2026. It is also assessing options to accelerate Jansen Stage 2.
Through fiscal 2023, BHP made strategic investments and exploration progress in copper and nickel prospects globally. This included Kabanga in Tanzania, Oak Dam in Australia, Filo Mining with the Filo del Sol project in Argentina and Chile, and Ocelot in the United States, as well as Serbia and Peru.
Peer Performance
Vale S.A. VALE reported iron ore production of 78.7 Mt for the second quarter of 2023, which was up 18% sequentially and 6% year over year. The improvement was aided by the record performance at S11D as well as solid performance at Itabira and Vargem Grande complexes.
In the second quarter of 2023, Vale produced 78.8 kt of copperI Production of nickel rose 7.9% year over year to 36.9 kt on improved operational performance in Sudbury and Indonesia. VALE’s iron ore production guidance for 2023 remains at 310-320 Mt.
Rio Tinto RIO reported a 3% increase in second-quarter 2023 iron ore production to 81.3 Mt. Gudai-Darri achieved sustained nameplate capacity during the quarter. Aluminum production was up 11% year over year while bauxite production was down 5%. Copper output was in line with the year-ago quarter.
RIO now expects Pilbara iron ore shipments (100% basis) to be in the upper half of the prior stated guidance of 320-335 Mt for 2023. This is backed by ongoing operational improvements across the Pilbara system and the implementation of the Safe Production System.
Price Performance
BHP’s shares have gained 19.1% in a year, compared with the industry’s 11.5% growth.
Image Source: Zacks Investment Research
Zacks Rank & a Key Pick
BHP currently carries a Zacks Rank #3 (Hold).
A better-ranked stock in the basic materials space is Carpenter Technology Corporation CRS which currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate CRS’s earnings for the current fiscal year is pegged at $1.04 per share, implying year-over-year growth of 198.1%. It has a trailing four-quarter earnings surprise of roughly 30.9%, on average. The stock has gained around 97% in a year.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
BHP Group Limited Sponsored ADR (BHP) : Free Stock Analysis Report
VALE S.A. (VALE) : Free Stock Analysis Report
Rio Tinto PLC (RIO) : Free Stock Analysis Report
Carpenter Technology Corporation (CRS) : Free Stock Analysis Report
