BHP aiming to hit top of iron ore production guidance

UK-Australian resources firm BHP expects to come in at the top half of its iron ore production guidance of 245mn-255mn t on an equity basis for the fiscal year to 30 June, after a strong first nine months in Western Australia (WA) and the restart of the Samarco operations in Brazil.

The increased confidence comes despite a 4pc fall in WA production on a 100pc basis to 66.7mn t during January-March from 70.41mn t for October-December because of wet weather and maintenance at the ore handling plant and the stacker at the Newman mining hub, as well as tie in-activity at Mining Area C.

The firm's WA mines must produce at least 69.7mn t during April-June to hit the top half of BHP's 276mn-286mn t target for WA iron ore production on a 100pc basis for 2020-21. This should be achieved given that the firm produced 75.59mn t at its WA operations during April-June 2020, which if repeated would put BHP ahead of its guidance. BHP shipments of iron ore rebounded in the week to 17 April after heavy rain affected exports at the start of the month.

April-June is typically the strongest production quarter for BHP's WA iron ore operations as it follows the end of the Pilbara wet season and is the final quarter in the firm's fiscal year. But skills shortages could affect production this year, particularly as BHP begins commissioning its 80mn t/yr South Flank mine during the quarter. The company is investing $3.06bn to develop South Flank to replace production from its Yandi iron ore mine, aiming to increasing the overall grade of its iron ore blends.

BHP increased its production guidance by 1mn-2mn t in January to account for the restart of its Samarco joint venture in Brazil with domestic mining firm Vale. Samarco has produced 915,000t of pellet since one of the concentrators restarted in December and is expected to produce 2mn-4mn t by the end of June, contributing 1mn-2mn t to BHP's total production.

Production eased at Jimblebar and Newman during January-March compared with October-December, while Mining Area C production increased despite tie-in activity.

BHP rebuilt some WA stocks during January-March, having drawn down on them in October-December.

Argus last assessed the ICX iron ore price yesterday at a new high of $188.70/dmt cfr Qingdao on a 62pc Fe basis, up from $167.45/dmt on 1 April and up from $119.20/dmt six months earlier.

By Jo Clarke