| Wed 18 Oct 2023, 8:15 | | BHP GROUP LIMITED - Quarterly Activities Report |
|
Quarterly Activities Report
BHP Group Limited
BHP Group Limited ABN 49 004 028 077
Registered in Australia
Registered Office: Level 18, 171 Collins Street Melbourne VIC 3000
Share code: BHG
ISIN: AU000000BHP4
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 BMA entered into a new renewable power purchase agreement
increased 11%, including record quarterly production at (PPA) which is expected to provide half the forecasted
Spence. BMA production was lower due to maintenance, an electricity demand of BMA's operations over five years from
extended longwall move and low inventory. We also executed January 2026; and we signed a memorandum of understanding
major planned maintenance across our Australian business. (MoU) with Toyota 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 We saw strong underlying operational performance in
high-quality iron ore to China. Since its initial investment the first full quarter of production from the newly-integrated
over 30 years ago to the end of FY23, WAIO has delivered 15% Copper South Australia, while our Jansen Stage 1 project
average annual returns and, over the past decade, has remains on budget and on track to deliver first production by
increased production by >50% and lowered costs by >30%. the end of CY26 (32% complete).
FY24 YTD v Q1 FY24 v Current FY24
Production Q1 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
Carajas (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.
--------------------------------------------------------------------------------
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 kt Up 11%
Q1 FY23 410.1 kt Escondida 273 kt Up 8% (100% basis)
FY24e 1,720 - 1,910 kt Increased production was primarily due to higher concentrator feed grade of
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
remains unchanged at between 1,080 and 1,180 kt, with production expected to be
Average realised price/1,2/ weighted towards the second half of the year.
US$3.63/lb Down 4% Escondida successfully completed negotiations for a new collective agreement
with the Union N(degree)2 of Supervisors, effective for 36 months from
H2 FY23 US$3.80/lb 1 October 2023.
Pampa Norte 78 kt Up 11%
Production at Spence increased 19% to a quarterly record of 69 kt, largely as 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.
Carajas 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%
Q1 FY23 65.1 Mt WAIO 62 Mt Down 3% | 69 Mt (100% basis)
FY24e 254 - 264.5 Mt Production was lower due to tie-in activity for the Rail Technology
Programme (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.
Average realised price/1/
South Flank remains on track to ramp up to full production capacity of 80 Mtpa
US$98.04/wmt Down 2% (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 be completed in
H2 FY23 US$99.88/wmt CY24.
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
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, and a
Q1 FY23 6.7 Mt stoppage at Peak Downs. This was partially offset by strong underlying truck
productivity and favourable weather conditions. BMA also opened the period with
FY24e 28 - 31 Mt low inventory levels compared with an inventory drawdown in the prior year due to wet
weather.
Average realised price/1/ Guidance for FY24 remains unchanged at between 28 and 31 Mt (56 and 62 Mt on a
100% basis). Planned wash plant maintenance at Peak Downs and Caval Ridge and the
US$237.07/t Down 13% ramp up of Broadmeadow from the longwall move will continue into Q2. Once
completed, we expect underlying operating performance to deliver increased
H2 FY23 US$273.08/t production in the second half.
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%
3.6 Mt Up 38% Production increased due to favourable weather conditions and eased labour
constraints, which enabled record annualised truck hours for the quarter. This
Q1 FY23 2.6 Mt was partially offset by planned wash plant maintenance completed in August.
FY24e 13 - 15 Mt Guidance for FY24 remains unchanged at between 13 and 15 Mt.
On 6 September 2023, the NSW Government announced a 2.6% point increase in coal
Average realised price/1,3/ 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 for the
US$125.66/t Down 20% domestic reservation policy.
H2 FY23 US$157.21/t 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
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%
20.2 kt Down 2% Production decreased marginally in line with higher stripping activity at Mt
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, 63.2 Mt Down 3% Lower production at WAIO as a result of
including record quarterly production at planned equipment maintenance and the
Q4 FY23 476.2 kt Spence, was offset by planned maintenance Q4 FY23 65.3 Mt ongoing ramp-up of the Central Pilbara
across Copper South Australia and lower hub, partially offset by favourable
concentrator and stacking grades at weather following Tropical Cyclone Ilsa
Escondida. in the prior quarter.
--------------------------------------------------------------------------------------------------------------------------------
Metallurgical coal Energy coal
5.6 Mt Down 34% The low opening inventory position 3.6 Mt Down 24% Lower volumes at NSWEC reflected
following drawdowns in Q4 FY23, along planned wash plant maintenance, and a
Q4 FY23 8.5 Mt with planned wash plant maintenance at Q4 FY23 4.8 Mt focus on additional stripping volumes
Blackwater and Goonyella, a higher strip which resulted in higher strip ratios.
ratio, a longer than planned longwall move
at Broadmeadow and an unexpected 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
Q4 FY23 22.0 kt quarter.
--------------------------------------------------------------------------------------------------------------------------------
Further information in Appendix 1
Detailed production and sales information for all operations in Appendix 2
--------------------------------------------------------------------------------------------------------------------------------
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 v
Q1 FY24 H2 FY23 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
WAIO (100% basis)............................................. >305 Mt