REG - BHP Group Limited - Quarterly Activities Report
18/10/2023 07:00
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RNS Number : 4498Q BHP Group Limited 18 October 2023
18 October 2023
Operational review for the quarter ended 30 September 2023
We remain on track to deliver full year production and unit cost guidance at
all assets.
First quarter operational performance was highlighted by a 11% uplift in
copper production from the previous year. After completing a typically busy
quarter of planned maintenance particularly at our Australian assets, we are
on track to achieve full year production and unit cost guidance. BMA in
particular was impacted by planned maintenance, an extended longwall move and
low opening inventory following drawdowns in the prior year.
Jansen Stage 1 in Canada is approximately one-third complete after a
productive summer. In South Australia, we saw strong operational performance
in the first full quarter of production for the new province, as we bring our
copper assets together and progress further exploration drilling.
Mike Henry
BHP Chief Executive Officer
Summary
Operational performance Social value
On track to deliver production guidance Operational decarbonisation
FY24 production guidance remains unchanged. Copper production increased 11%, BMA entered into a new renewable power purchase agreement (PPA)
including record quarterly production at Spence. BMA production was lower due (https://www.bhp.com/news/media-centre/releases/2023/09/bma-signs-new-five-year-renewable-power-purchase-agreement)
to maintenance, an extended longwall move and low inventory. We also executed which is expected to provide half the forecasted electricity demand of BMA's
major planned maintenance across our Australian business. operations over five years from January 2026; and we signed a memorandum of
understanding (MoU) with Toyota
(https://www.bhp.com/news/media-centre/releases/2023/08/toyota-australia-and-bhp-join-forces-to-prioritise-safety-and-decarbonisation)
to reduce GHG emissions from light vehicles in Australia.
Large, long-life, low-cost assets Growth
3 Bt of iron ore shipped to China Progress in copper and potash provinces
In September, BHP recognised the shipment of 3 Bt of high-quality iron ore to We saw strong underlying operational performance in the first full quarter of
China production from the newly-integrated Copper South Australia, while our Jansen
(https://www.bhp.com/news/media-centre/releases/2023/09/bhp-celebrates-delivery-of-three-billion-tonnes-of-iron-ore-to-china) Stage 1 project remains on budget and on track to deliver first production by
. Since its initial investment over 30 years ago to the end of FY23, WAIO has the end of CY26 (32% complete).
delivered 15% average annual returns and, over the past decade, has increased
production by >50% and lowered costs by >30%.
Production Q1 FY24 FY24 YTD v Q1 FY24 v Current FY24
FY23 YTD
Q4 FY23
guidance
Copper (kt) 457.0 11% (4%) 1,720 - 1,910
Escondida (kt) 273.3 8% (7%) 1,080 - 1,180 Unchanged
Pampa Norte (kt) 78.3 11% 14% 210 - 250(i) Unchanged
Copper South Australia (kt)(ii) 71.7 44% (6%) 310 - 340 Unchanged
Antamina (kt) 32.5 (12%) (11%) 120 - 140 Unchanged
Carajás (kt)(ii) 1.2 - (25%) - -
Iron ore (Mt) 63.2 (3%) (3%) 254 - 264.5
WAIO (Mt) 62.0 (3%) (3%) 250 - 260 Unchanged
WAIO (100% basis) (Mt) 69.4 (4%) (4%) 282 - 294 Unchanged
Samarco (Mt) 1.2 7% 1% 4 - 4.5 Unchanged
Metallurgical coal - BMA (Mt) 5.6 (16%) (34%) 28 - 31
BMA (100% basis) (Mt) 11.2 (16%) (34%) 56 - 62 Unchanged
Energy coal - NSWEC (Mt) 3.6 38% (24%) 13 - 15 Unchanged
Nickel - Nickel West (kt) 20.2 (2%) (8%) 77 - 87 Unchanged
i Production guidance for FY24 is for Spence only and
excludes Cerro Colorado which is now expected to produce ~11 kt, up from
previous guidance of ~9 kt, as it transitions to closure by 31 December
2023.
ii Q4 FY23 production volumes for the operations acquired
from OZL are for the period of 1 May to 30 June 2023.
1
BHP | Operational review for the quarter ended 30 September 2023
Segment and asset performance | FY24 YTD v FY23 YTD
Copper
Production Total copper production increased by 11% to 457 kt. Guidance for FY24 remains
unchanged at between 1,720 and 1,910 kt.
457.0 kt Up 11%
Escondida 273 kt Up 8% (100% basis)
Increased production was primarily due to higher concentrator feed grade of
Q1 FY23 410.1 kt 0.85%, compared to 0.83% in the September 2022 quarter. Concentrator feed
grade is expected to be between 0.85% and 0.90% during FY24. Guidance for FY24
FY24e 1,720 - 1,910 kt remains unchanged at between 1,080 and 1,180 kt, with production expected to
be weighted towards the second half of the year.
Escondida successfully completed negotiations for a new collective agreement
Average realised price(1,2) with the Union N°2 of Supervisors, effective for 36 months from 1 October
2023.
US$3.63/lb Down 4%
Pampa Norte 78 kt Up 11%
Production at Spence increased 19% to a quarterly record of 69 kt, largely as
H2 FY23 US$3.80/lb a result of improved concentrator performance and recoveries. The concentrator
plant modifications, which commenced in August 2022, are now expected to be
completed in FY24. Guidance for Spence remains unchanged at between 210 and
250 kt for FY24, subject to the remediation of the previously identified
anomalies in the Spence Tailings Storage Facility.
Production at Cerro Colorado was 26% lower at 9 kt as it transitions towards
closure by the end of December 2023. Production for H1 FY24 is now expected to
be ~11 kt, up from a previous estimate of ~9 kt.
Copper South Australia 72 kt Up 44%
Production increased due to the additional 23 kt from Prominent Hill and
Carrapateena. Pleasingly, integration of the Olympic Dam, Prominent Hill and
Carrapateena assets has gone well, with strong operational performance and
continued focus on safe and reliable production, in particular at Olympic Dam
(record material mined since FY15) and Carrapateena (record development metres
achieved in September). Planned maintenance was completed across the province.
In addition, we upgraded a conveyor at Carrapateena, ahead of the planned
commissioning of Crusher 2 in Q3 FY24. Olympic Dam also delivered record gold
production (for the second time in three quarters) and gold sales in the
quarter.
Production guidance remains unchanged at between 310 and 340 kt for FY24.
Exploration drilling continued beneath the Olympic Dam ore body with eight
active drill rigs and at Oak Dam with 10 operating drill rigs.
Other copper
Antamina copper production decreased by 12% to 33 kt reflecting planned lower
copper feed grades. Zinc production was 9% higher at 36 kt, reflecting higher
grades. Copper guidance of 120 to 140 kt and zinc guidance of between 85 and
105 kt remains unchanged for FY24.
Carajás produced 1.2 kt of copper and 0.8 troy koz of gold. Operations were
suspended in August due to a geotechnical event, and are expected to
recommence in Q2 FY24.
2
BHP | Operational review for the quarter ended 30 September 2023
Iron ore
Production Total iron ore production decreased by 3% to 63 Mt. Guidance for FY24 remains
unchanged at between 254 and 264.5 Mt.
63.2 Mt Down 3%
WAIO 62 Mt Down 3% | 69 Mt (100% basis)
Production was lower due to tie-in activity for the Rail Technology Programme
Q1 FY23 65.1 Mt (RTP1), the ongoing ramp up and maintenance at the Central Pilbara hub (South
Flank and Mining Area C), and the timing of track renewal maintenance.
FY24e 254 - 264.5 Mt
South Flank remains on track to ramp up to full production capacity of 80 Mtpa
(100% basis) by the end of FY24. The planned tie-in of the Port
Debottlenecking Project (PDP1) continues to progress and remains on track to
Average realised price(1) be completed in CY24.
US$98.04/wmt Down 2% Guidance for FY24 remains unchanged at between 250 and 260 Mt (282 and 294 Mt
on a 100% basis). We are building inventory at the mines while we complete
H2 FY23 US$99.88/wmt planned maintenance and with South Flank continuing to ramp up, volumes are
expected to be weighted to the second half.
Samarco 1.2 Mt Up 7% | 2.5 Mt (100% basis)
Production increased as a result of higher concentrator throughput. Guidance
for FY24 remains unchanged at between 4 and 4.5 Mt.
Coal
Metallurgical coal
Production BMA 5.6 Mt Down 16% | 11.2 Mt (100% basis)
5.6 Mt Down 16% Lower production was due to planned wash plant maintenance at Goonyella,
mining in higher strip ratio areas, an extended longwall move at Broadmeadow,
Q1 FY23 6.7 Mt and a stoppage at Peak Downs. This was partially offset by strong underlying
truck productivity and favourable weather conditions. BMA also opened the
FY24e 28 - 31 Mt period with low inventory levels compared with an inventory drawdown in the
prior year due to wet weather.
Guidance for FY24 remains unchanged at between 28 and 31 Mt (56 and 62 Mt on a
Average realised price(1) 100% basis). Planned wash plant maintenance at Peak Downs and Caval Ridge and
the ramp up of Broadmeadow from the longwall move will continue into Q2. Once
US$237.07/t Down 13% completed, we expect underlying operating performance to deliver increased
production in the second half.
H2 FY23 US$273.08/t
In February 2023, we announced our intention to pursue options to divest the
Daunia and Blackwater mines together with our joint venture partner Mitsubishi
Development Pty Ltd. BHP confirms that Whitehaven Coal has been selected as
the preferred bidder in the divestment process.
Energy coal
Production NSWEC 3.6 Mt Up 38%
Production increased due to favourable weather conditions and eased labour
3.6 Mt Up 38% constraints, which enabled record annualised truck hours for the quarter. This
was partially offset by planned wash plant maintenance completed in August.
Q1 FY23 2.6 Mt
Guidance for FY24 remains unchanged at between 13 and 15 Mt.
FY24e 13 - 15 Mt
On 6 September 2023, the NSW Government announced a 2.6% point increase in
coal royalties (from 8.2% to 10.8% for open cut mines), which will become
effective from 1 July 2024, coinciding with the end of the legislated period
Average realised price(1,3) for the domestic reservation policy.
US$125.66/t Down 20% We have submitted a consent modification to mine beyond FY26 to closure in
FY30, and will take into consideration the increase to NSW royalties in the
H2 FY23 US$157.21/t plans for closure.
3
BHP | Operational review for the quarter ended 30 September 2023
Group & Unallocated
Nickel
Production Nickel West 20.2 kt Down 2%
Production decreased marginally in line with higher stripping activity at Mt
20.2 kt Down 2% Keith mining operations.
Q1 FY23 20.7 kt Guidance remains unchanged at between 77 and 87 kt for FY24. The refinery
shutdown planned for October 2023 will now largely be completed in February
FY24e 77 - 87 kt 2024, and as a result production is expected to be relatively flat across the
remainder of the year.
Average realised price(1)
US$20,354/t Down 14%
H2 FY23 US$23,652/t
Quarterly performance | Q1 FY24 v Q4 FY23
Copper Iron ore
457 kt Down 4% Strong underlying operational performance, including record quarterly 63.2 Mt Down 3% Lower production at WAIO as a result of planned equipment maintenance and the
production at Spence, was offset by planned maintenance across Copper South
ongoing ramp-up of the Central Pilbara hub, partially offset by favourable
Q4 FY23 476.2 kt Australia and lower concentrator and stacking grades at Escondida. Q4 FY23 65.3 Mt weather following Tropical Cyclone Ilsa in the prior quarter.
Metallurgical coal Energy coal
5.6 Mt Down 34% The low opening inventory position following drawdowns in Q4 FY23, along with 3.6 Mt Down 24% Lower volumes at NSWEC reflected planned wash plant maintenance, and a focus
planned wash plant maintenance at Blackwater and Goonyella, a higher strip
on additional stripping volumes which resulted in higher strip ratios.
Q4 FY23 8.5 Mt ratio, a longer than planned longwall move at Broadmeadow and an unexpected Q4 FY23 4.8 Mt
stoppage at Peak Downs resulted in lower volumes at BMA.
Nickel
20.2 kt Down 8% Lower volumes in line with higher stripping activity at Mt Keith in the
quarter.
Q4 FY23 22.0 kt
Further information in Appendix 1 (#_Appendix_1)
Detailed production and sales information for all operations in Appendix 2
(#_Appendix_2_1)
The following footnotes apply to this Operational Review:
1 Based on provisional, unaudited estimates. Prices
exclude sales from equity accounted investments, third party product and
internal sales, and represent the weighted average of various sales terms (for
example: FOB, CIF and CFR), unless otherwise noted. Includes the impact of
provisional pricing and finalisation adjustments.
2 Does not include sales from assets acquired through the
purchase of OZL.
3 Export sales only. Includes thermal coal sales from
metallurgical coal mines.
4
BHP | Operational review for the quarter ended 30 September 2023
Appendix 1
Average realised prices(1)
Q1 FY24 H2 FY23 Q1 FY24 v
H2 FY23
Copper (US$/lb)(2) 3.63 3.80 (4%)
Iron ore (US$/wmt, FOB) 98.04 99.88 (2%)
Metallurgical coal (US$/t) 237.07 273.08 (13%)
Hard coking coal (US$/t)(3) 242.52 276.22 (12%)
Weak coking coal (US$/t)(3) 190.74 250.38 (24%)
Thermal coal (US$/t)(4) 125.66 157.21 (20%)
Nickel metal (US$/t) 20,354 23,652 (14%)
1 Based on provisional, unaudited estimates. Prices
exclude sales from equity accounted investments, third party product and
internal sales, and represent the weighted average of various sales terms (for
example: FOB, CIF and CFR), unless otherwise noted. Includes the impact of
provisional pricing and finalisation adjustments.
2 Does not include sales from assets acquired through the
purchase of OZL.
3 Hard coking coal (HCC) refers generally to those
metallurgical coals with a Coke Strength after Reaction (CSR) of 35 and above,
which includes coals across the spectrum from Premium Coking to Semi Hard
Coking coals, while weak coking coal (WCC) refers generally to those
metallurgical coals with a CSR below 35.
4 Export sales only. Includes thermal coal sales from
metallurgical coal mines.
Current year unit cost guidance
Current
FY24 guidance(1)
Escondida unit cost (US$/lb)(2) 1.40 - 1.70 Unchanged
Spence unit cost (US$/lb) 2.00 - 2.30 Unchanged
WAIO unit cost (US$/t) 17.40 - 18.90 Unchanged
BMA unit cost (US$/t) 95 - 105 Unchanged
1 FY24 unit cost guidance is based on exchange rates of
AUD/USD 0.67 and USD/CLP 810.
2 Escondida unit costs for FY24 onwards exclude
revenue-based government royalties.
Medium term guidance
Production Unit cost
guidance guidance(1)
Escondida(2) 1,200 - 1,300 kt US$1.30 - $1.60/lb(3)
Spence(4) ~250 kt
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