BHP cuts 2024-25 met coal target with divestment

Australian resources firm BHP has set a lower coking coal production target for the 2024-2025 financial year that started on 1 July, after its divestment of the Blackwater and Daunia mines. But the miner has also set its sights on increasing output from its remaining assets.

The BHP Mitsubishi Alliance (BMA), which is 50pc owned by BHP and 50pc owned by Mitsubishi, has set lower production targets of 33mn-38mn t for 2024-25. The targets are reflective of the sale of its Blackwater and Daunia mines to Australian producer Whitehaven Coal that was completed on 2 April, and the impact of elevated strip ratios. The two mines together contributed 10mn t on a 100pc basis to the 2023-24 production before their divestment, the company said on 17 July.

BMA met its production guidance of 43mn-45mn t by producing 44.6mn t of coal in the 2023-24 financial year to 30 June. Production fell by 22pc from a year earlier, because of an extended longwall move and geotechnical issues at Broadmeadow in the first half of the fiscal year, the disruption at its 10mn t/yr Saraji mine in Queensland, as well as increased waste removal and stockpile rebuilding after the disruption caused by wet weather and labour shortages in 2023.

BHP received an average price of $271.26/t for hard coking coal and $206.84/t for weak coking coal in January-June, compared to an average of $276.22/t and $250.38/t in January-June 2023. It defines hard coking coal as those with a coke strength after reaction (CSR) of 35 and above and weak coking coal as those with a CSR of below 35.

BHP expects to be in the lower half of its cost guidance for the 2024 fiscal year. Expectations of lower production volumes led BHP to increase its cost guidance for the 2024 fiscal year to $119-125/t in April from $110-116/t in January and from $95-105/t in June 2023.

The firm is expecting production to increase to 43mn-45mn t/yr in the next five years, once stockpile rebuilding reaches a sustainable level and strip ratios normalise.

Argus last assessed the premium hard low-volatile metallurgical coal price at $236/t fob Australia on 16 July, down from $326.70/t on 2 January.