BHP Remains On Track To Deliver Higher Production Than Last Year

 

BHP Chief Executive Officer, Mike Henry, said, “We delivered solid operational performances across the portfolio in the first half of the 2020 financial year, offsetting the expected impacts of planned maintenance and natural field decline. Production and cost guidance is unchanged, and we remain on track to deliver slightly higher production than last year. Our major development projects are progressing well, and we continue to advance our exploration programs.” 

At the end of December 2019, BHP had six major projects under development in petroleum, copper, iron ore and potash, with a combined budget of US$11.4 billion over the life of the projects. All major projects under development are tracking to plan.  In November 2019, BHP approved US$44 million for BHP Brasil’s share of the funding for work related to the restart of one concentrator at Samarco. The funding will enable the construction of a filtration plant and the commencement of operation readiness activities. This follows the approval of the Corrective Operating License (LOC) for Samarco’s operating activities at its Germano Complex in October 2019. Restart can occur when the filtration system is complete and Samarco has met all necessary safety requirements, and will be subject to final approval by Samarco’s shareholders. 

Also in December 2019, BHP agreed to fund a total of US$793 million in further financial support for the Renova Foundation and Samarco. This comprises US$581 million to fund the Renova Foundation until 31 December 2020 which will be offset against the Group’s provision for the Samarco dam failure, and a short-term facility of up to US$212 million to be made available to Samarco until 31 December 2020. 

As at the date of this Operational Review, for the purpose of the December 2019 half year financial results, we are not in a position to provide an update on the ongoing potential financial impacts on BHP Brasil of the Samarco dam failure. Any financial impacts will continue to be treated as an exceptional item. 

Total copper production increased by seven per cent to 885 kt. Guidance for the 2020 financial year remains unchanged at between 1,705 and 1,820 kt. 

Escondida copper production increased by four per cent to 602 kt, with record average concentrator throughput of 367 ktpd for the half year, driven by ongoing improvements in maintenance and operational performance under our Transformation program. This offset expected grade decline and a 5 kt concentrate production impact related to stoppages associated with the social unrest in Chile. Including cathodes, the total production impact of the stoppages is expected to be 7 kt for the 2020 financial year. The Escondida Water Supply Expansion project was completed in December 2019, on schedule and budget, further increasing total desalinated water capacity to 3,800 liters per second. Guidance for the 2020 financial year remains unchanged at between 1,160 and 1,230 kt, with further improvements in concentrator throughput expected to offset an approximately five per cent reduction in the copper grade of concentrator feed versus the prior year. 

Pampa Norte copper production increased by 18 per cent to 124 kt, reflecting the impact of a fire at the electro- winning plant at Spence in the prior year. Guidance for the 2020 financial year remains unchanged at between 230 and 250 kt, including expected grade decline of approximately 10 per cent. 

Olympic Dam copper production increased by 32 per cent to 86 kt as a result of the prior period acid plant outage, partially offset by the impact of planned preparatory work undertaken in the September 2019 quarter related to the replacement of the refinery crane. The physical replacement and commissioning of the refinery crane is scheduled for the March 2020 quarter. Guidance for the 2020 financial year remains unchanged at between 180 and 205 kt. 

Antamina copper production decreased by two per cent to 74 kt and zinc production decreased by 22 per cent to 43 kt, reflecting lower copper and zinc head grades, in line with the mine plan. Guidance for the 2020 financial year remains unchanged at approximately 135 kt for copper and approximately 110 kt for zinc. 

Metallurgical coal production was down two per cent to 20 Mt (36 Mt on a 100 per cent basis). Guidance for the 2020 financial year remains unchanged at between 41 and 45 Mt (73 and 79 Mt on a 100 per cent basis), with a stronger second half performance expected in line with our plans.  At Queensland Coal, strong underlying operational performance at Poitrel, Peak Downs, Caval Ridge and Broadmeadow was offset by planned major wash plant shutdowns at Goonyella, Peak Downs and Caval Ridge, low opening raw coal inventories at Blackwater, and truck and shovel underperformance at South Walker Creek. 

 Energy coal production decreased by 12 per cent to 12 Mt. Guidance for the 2020 financial year remains unchanged at between 24 and 26 Mt. New South Wales Energy Coal production decreased by 11 per cent to 7 Mt as a result of the change in product strategy to focus on higher quality products. Smoke from regional bushfires and dust have reduced air quality at our operations, which has impacted December 2019 production. We are monitoring the situation and if air quality continues to deteriorate then operations could be constrained further in the second half of the year. Guidance for the 2020 financial year remains unchanged at between 15 and 17 Mt. Cerrejón production decreased by 13 per cent to 4 Mt as a result of a focus on higher quality products, in line with the mine plan, and the impact of adverse weather in the September 2019 quarter. Guidance for the 2020 financial year remains unchanged at approximately 9 Mt. 

Minerals exploration expenditure for the December 2019 half year was US$84 million, of which US$67 million was expensed. Greenfield minerals exploration is predominantly focused on advancing copper targets within Chile, Ecuador, Mexico, Peru, Canada, South Australia and the south-west United States. Consistent with our focus on copper, in November 2019, BHP increased its interest in SolGold Plc, the majority owner and operator of the Cascabel porphyry copper-gold project in Ecuador, by 3.6 per cent to 14.7 per cent. At Oak Dam in South Australia, the third phase of the drilling program commenced in November 2019 and is expected to be completed in the June 2020 quarter. This follows encouraging results from the previous drilling phases, which confirmed high-grade mineralized intercepts of copper, with associated gold, uranium and silver. 

The company’s address is 171 Collins Street, Melbourne Victoria 3000, (61-3) 1300-55-47-57, www.bhp.com.