BHP delivers \u2018mixed result\u2019 with copper and iron ore on track to hit guidance but met coal in struggle town
\nNickel business mystery continues, as BHP sets August deadline for decision on care and maintenance
\nIron ore down in March, but analysts expect seasonally strong June quarter<\/p>\n
BHP (ASX:BHP)<\/a> has given itself another four months to decide what it does with its loss-making nickel division, flagging a decision by its financial results in August.<\/p>\n The world\u2019s biggest miner revealed the sort of plan in its quarterly review this morning, which also showed an expected drop in iron ore production in the March quarter and more pain at BHP\u2019s met coal division.<\/p>\n BHP put its Nickel West division on notice in February, writing off its value by US$2.5b to negative<\/em> US$300m. That means it effectively costs BHP to have the company on its books, having reacted to what it views as a structural downwards shift in nickel pricing thanks to a flood of supply from cheap Indonesian producers.<\/p>\n As nickel prices fell from US$30,000\/t to ~US$16,000\/t over the course of last year and Indonesian processors largely backed by Chinese interests grabbed a 50% market share of the battery metal and stainless steel ingredient, BHP lost US$200m in the December half on the assets.<\/p>\n CEO Mike Henry recently estimated BHP, despite producing around 80,000tpa, needs prices of US$20,000\/t and above to break even. It pulled in US$16,581\/t in the March quarter and US$18,104\/t in the year to date. A decision by the LME and Comex to ban Russian metal from being deposited in their warehouses has provided a lift though, with prices up in recent days to US$18,238\/t.<\/p>\n There appears a glimmer of hope from the quarterly review that BHP will look to trim costs to make Nickel West viable \u2014 including reducing contractor numbers at its core business and $1.7 billion West Musgrave development \u2014 rather than place the business on mothballs.<\/p>\n Looming large is a US$900m rehabilitation liability, probably a drop in the ocean compared to the amount BHP would actually have to spend to clean up Nickel West in the event of closure.<\/p>\n \u201cAs announced in our HY24 results in February 2024, we continue to review our plans for Western Australia Nickel with a focus on preserving cash,\u201d BHP noted. <\/p>\n \u201cThis includes optimising operations and maintenance schedules, reviewing capital plans, and reducing contractor spend and equipment hire. <\/p>\n \u201cOur review also includes assessing the potential to place Nickel West into a period of care and maintenance and the phasing and capital spend for the development of the West Musgrave project. We expect to provide an update on the longer-term future of Western Australia Nickel by the FY24 results in August 2024.\u201d<\/p>\n \u00a0<\/p>\n In production terms Nickel West output was down 4% on the quarter to 19,000t, but remains 1% ahead of last year at 59,000t YTD.<\/p>\n BHP has maintained its copper and iron ore guidance and cost expectations for FY24, though the WAIO business saw output slide 7% to 68.1Mt (100% basis). Samarco output was down slightly to 1.2Mt.<\/p>\n The miner blamed rainfall in the Pilbara, a bushfire near Yandi, integration of a rail technology program and ramp up activities at the Mining Area C zone for a weak March quarter.<\/p>\n BHP will need to deliver 72Mt in the June quarter to hit the lower end of full year guidance (282-294Mt). <\/p>\n Its copper division looks to be on track to hit guidance of 1.72-1.91Mt by the end of June, with output of 1.36Mt so far this year up 10% on FY23.<\/p>\n Tonnes were up 7% QoQ and 15% YoY to 465,900t in the March quarter, with a 13% production lift (7% YTD) at Escondida \u2014 the world\u2019s largest copper mine \u2014 and the incorporation of OZ Minerals\u2019 Prominent Hill and Carrapateena mines into its Copper South Australia business two key factors.<\/p>\n Met coal meanwhile was less impressive, with BMA\u2019s output guidance shifted downwards from 46-50Mt to 43-45Mt and cost guidance revised up from US$110-116\/t to US$119-125\/t, the second major guidance change this year.<\/p>\n Production is down 16% YTD, but was up 6% QoQ to 12.1Mt in the March quarter (half of that attributable to BHP). On a more positive note, BHP says the US$4.1b sale of its Daunia and Blackwater mines <\/a>to Whitehaven Coal (ASX:WHC)<\/a> will see more than 85% of its sales come from premium hard coking coal \u2014 the top graded coal product on the seaborne market.<\/p>\n The Mt Arthur thermal coal mine in New South Wales has increased YTD production by 23% to 11.6Mt, with BHP expecting to hit the upper end of its 13-15Mt guidance range, though prices were down 6% to US$120.97\/t against the half year for the YTD, with March quarter pricing at a year long low of US$116.11\/t.<\/p>\n BHP\u2019s iron ore pricing slid marginally by 3% to US$106.30\/t in the March quarter, but portends healthy FY24 profits with pricing of US$104.53\/t YTD. WAIO unit costs are expected to fall between US$17.40-18.90\/t.<\/p>\n From a project perspective, the US$5.7b Jansen potash project in Canada is 44% complete with first production planned by the end of CY2026.<\/p>\n RBC\u2019s Kaan Peker described it as a \u2018mixed result\u2019.<\/p>\n \u201cA mixed 3Q result. While 3Q production numbers were higher than Consensus\/RBCe on Copper (and iron ore vs RBCe), there has been another notable reduction in CY24 Met coal production guidance (two quarters in a row) and higher unit-costs guidance. This will likely weigh on the stock today, resulting in FY24 consensus eps\/FCF reductions,\u2019 he said in a note.<\/p>\n \u201cOn the positive side, Copper volumes beat with Spence reporting strong throughput and recovery. We have a Sector Perform rating on BHP, with A$45\/sh (2300p) price target. <\/p>\n \u201cWhile BHP is trading in line with our PT, 1) we sit marginally above consensus for CY24 copper and met coal prices; 2) BHP also provides strong FCF\/div yield and balance sheet; 3) near-term copper growth from Escondida (FY26 1.3Mt), Spence, and longer-term from South Australia, supplemented by higher returning brownfield Iron ore growth, and potash.\u201d<\/p>\n Despite the somewhat wack results, BHP\u2019s share price was up almost 2% early doors as a surprise run in iron ore prices took Singapore futures beyond US$115\/t yesterday.<\/p>\n \u00a0<\/p>\n <\/span>\u00a0 The post BHP Results: The long, nervous wait to see if Nickel West survives continues<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"And now onto what actually makes BHP\u2019s moolah<\/h2>\n
BHP (ASX:BHP) share price today<\/h2>\n\n
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