BHP in recovery mode

MAJOR mining group BHP says production levels are beginning to recover from the economic shocks caused by the coronavirus pandemic.

In an operational update to the Australian Stock Exchange on Tuesday, the company noted it had met full-year production targets for iron ore, metallurgical coal and its copper and thermal coal assets.

It said petroleum and gas production was lower than expected during the downturn, fuelled by reduced gas demand in the June quarter.

“We expect to continue to generate solid cash flow through the cycle and we remain confident in the outlook … over the medium to long term,” BHP chief executive Mike Henry said.

BHP said the costs from the pandemic were expected to be up to $US150 million ($213.5m) for the second half of the 2020 financial year.

It said its economic predictions were in line with the International Monetary Fund’s forecasts of a global economic contraction of 4.9 per cent in the 2020 calendar year. BHP is expecting the world economy to be 6 per cent smaller in calendar 2021.

It also noted operational levels would be affected by government “hibernation policies” and recovery efforts.

BHP noted Australia’s ability to contain the virus had resulted in a faster return to production levels, however its South American operations continued at reduced capacity.

Iron ore production for the June quarter was 67 megatonnes, an 11 per cent increase on the previous corresponding quarter. For the 2020 financial year, BHP’s iron ore production was 248 megatonnes, a 4 per cent increase on 2019.

The miner produced 12 megatonnes of metallurgical coal, a 26 per cent rise on the third quarter.

The group noted increased petroleum at Bass Strait helped produce quarterly growth of 5 per cent, or 26 million barrels of oil.

However, lower demand globally meant production levels for 2020 fell 10 per cent on the previous financial year.

Thermal coal production is down 16 per cent compared to the 2019 financial year, while nickel production is down 8 per cent on the same period.

Copper production for the June quarter fell 3 per cent, but was 2 per cent above the end of financial year level in 2019.