| Thu 18 Jan 2024, 8:15 | | BHP GROUP LIMITED - Quarterly Activities Report |
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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 January 2024
Operational review for the half year ended 31 December 2023
Strong H1 in copper, iron ore and energy coal. Challenging half in metallurgical coal.
Tragically, a team member from BEP Engineering & Maintenance, a contracting
partner to BMA, was fatally injured in an incident at BMA’s Saraji mine
earlier this week. Our deepest sympathies are with their family, friends
and colleagues at this difficult time. We are committed to learning from
this tragedy and investigations into the incident are underway.
Operationally, BHP has had a solid first half. WA Iron Ore production was up 5%
quarter-on-quarter, while first half copper production rose 7% reflecting a
record half at Spence and ongoing strong performance and additional tonnes at
Copper South Australia. NSW Energy Coal had its best first half in five years, while
BMA had a tough six months following significant planned maintenance and low
starting inventories. At Nickel West, we are evaluating options to to mitigate the
impacts of the sharp fall in nickel prices.
We progressed our growth agenda during the quarter with ongoing construction of
the Jansen mine in Canada and the sanction of Jansen Stage 2, which doubles our
planned potash production capacity. In South Australia, we successfully
integrated our Copper SA business and significant exploration drilling beneath
Olympic Dam has identified attractive copper mineralisation above 1% grade along
a 2 km strike, with areas above 2%.
Mike Henry
BHP Chief Executive Officer
Summary
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Operational performance Portfolio
Production guidance unchanged, except at BMA Enhancing the quality of our portfolio
FY24 production guidance ranges remain unchanged for all assets with the exception of BMA which has been lowered to
between 23 and 25 Mt (46 - 50 Mt at 100%) excl. Blackwater and Daunia from the expected sale completion date of 2 April 2024.
Copper production increased/1/ 7%, including a record quarter at Carrapateena, and energy coal production increased 36%, with its FY24
production now expected to be in the upper end of the guidance range.
We are investing in growth with the approval of US$4.9 bn in Jansen Stage 2. We continued our strategic focus on higher
and quality metallurgical coal with the planned divestment of BMA's Blackwater and Daunia mines for cash consideration of up to
US$4.1 bn (100% basis).
We have undertaken ~62 km of exploratory drilling beneath Olympic Dam (OD Deeps), which has shown extensive mineralisation continuity,
with attractive copper grades of above 1% along more than 2 km in strike and more than 1 km in depth.
Results are included in Appendix 3.
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Financial performance Leadership
Unit cost guidance Executive Leadership Team update
WAIO, Escondida and Spence are expected to be within their respective unit cost guidance ranges at FY24, with BMA unit cost guidance
for FY24 increasing to between US$110/t and US$116/t as a result of the lowered production guidance.
In December, we announced a number of changes to our Executive Leadership Team, effective 1 March 2024, including that Catherine Raw
will join BHP from SSE plc as Chief Development Officer effective 29 April 2024.
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Quarter performance YTD performance FY24 production guidance
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Production Q2 FY24 v Q1 FY24 v Q2 FY23 HY24 v HY23 Previous Current
----------------------------------- --------- --------- --------- ------- -------- ------------- -------------
Copper (kt)........................ 437.4 (4%) 3% 894.4 7% 1,720 - 1,910 1,720 - 1,910
Escondida (kt).................. 254.6 (7%) (1%) 527.9 3% 1,080 - 1,180 1,080 - 1,180 Unchanged
Pampa Norte (kt)................ 59.8 (24%) (22%) 138.1 (6%) 210 - 250/i/ 210 - 250/i/ Unchanged
Copper South Australia (kt)..... 82.0 14% 51% 153.7 48% 310 - 340 310 - 340 Unchanged
Antamina (kt)................... 39.2 21% 11% 71.7 (1%) 120 - 140 120 - 140 Unchanged
Carajas (kt).................... 1.8 50% 3.0 -- -- --
Iron ore (Mt)...................... 65.8 4% (2%) 129.0 (2%) 254 - 264.5 254 - 264.5
WAIO (Mt)....................... 64.5 4% (2%) 126.5 (3%) 250 - 260 250 - 260 Unchanged
WAIO (100% basis) (Mt).......... 72.7 5% (2%) 142.1 (3%) 282 - 294 282 - 294 Unchanged
Samarco (Mt).................... 1.3 6% 19% 2.5 13% 4 - 4.5 4 - 4.5 Unchanged
Metallurgical coal - BMA (Mt)...... 5.7 2% (18%) 11.3 (17%) 28 - 31 23 - 25 Lowered
BMA (100% basis) (Mt)........... 11.4 2% (18%) 22.6 (17%) 56 - 62 46 - 50 Lowered
Energy coal - NSWEC (Mt)........... 3.9 7% 35% 7.5 36% 13 - 15 13 - 15 Upper end
Nickel - Nickel West (kt).......... 19.6 (3%) 11% 39.8 4% 77 - 87 77 - 87 Unchanged
i Production guidance for FY24 is for Spence only and excludes Cerro Colorado
which produced 11 kt before ceasing production on 9 November 2023.
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BHP | Operational review for the half year ended 31 December 2023
Summary of disclosures
BHP expects its financial results for the half year ended 31 December 2023 (HY24) to
reflect certain items summarised in the table below. The table does not provide
a comprehensive list of all items impacting the period. The financial statements
are the subject of ongoing work that will not be finalised until the release of
the financial results on 20 February 2024. Accordingly, the information in the
table below contains preliminary information that is subject to update and
finalisation.
H1 impact/i/
Description (US$M) Classification/ii/
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Unit costs (at guidance FX)/iii/
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At HY24, unit costs at WAIO and Escondida are expected to be within their
respective guidance ranges, while Spence is expected to be in the lower half of
its guidance range. Unit costs at BMA are expected to be substantially higher
than the revised guidance range due to the lower volumes -- Operating costs
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For FY24, unit cost guidance for WAIO, Escondida and Spence remains unchanged.
Unit cost guidance for BMA has been increased to between US$110/t and US$116/t
as a result of the decrease in expected production, and excludes Blackwater and
Daunia from the expected date of completion of the divestment -- Operating costs
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Note: weaker Australian dollar and Chilean peso than guidance rates were realised Refer footnote/iii/
in the period
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Income statement
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The Group's adjusted effective tax rate for HY24 is expected to be in the lower
half of the guidance range of 30 - 35% -- Taxation expense
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Cash flow statement
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Working capital movements including net price impacts, closure and
rehabilitation payments and other movements ~1,500 - 1,700 Up Operating cash flow
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Cash tax paid ~3,500 - 3,600 Down Operating cash flow
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Dividends received from equity-accounted investments ~200 Up Operating cash flow
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Dividends paid to non-controlling interests ~600 Down Financing cash flow
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Payment of the H2 FY23 dividend ~4,000 Down Financing cash flow
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Balance sheet
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The Group's net debt balance at 31 December 2023 is expected to be between $12.5
and $13.0 bn -- Net debt
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Exceptional items
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Financial impact on BHP Brasil of the Samarco dam failure
The financial impact is expected to primarily relate to amortisation of
discounting on the provision and the impact of foreign exchange Refer footnote/iv/ Exceptional item
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i Numbers are not tax effected, unless otherwise noted.
ii There will be a corresponding balance sheet, cash flow and/or income
statement impact as relevant, unless otherwise noted.
iii Average exchange rates for HY24 of AUD/USD 0.65 (guidance rate AUD/USD 0.67)
and USD/CLP 874 (guidance rate USD/CLP 810).
iv Financial impact is the subject of ongoing work and is not yet finalised.
See Iron ore section for further information on Samarco operations.
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LOGO Further information in Appendix 1
Detailed production and sales information for all operations in Appendix 2
Detailed drilling results for Olympic Dam Deeps Appendix 3
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2
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BHP | Operational review for the half year ended 31 December 2023
Segment and asset performance | FY24 YTD v FY23 YTD
Copper
Production Total copper production increased by 7% to 894
kt. Copper guidance for FY24 remains unchanged at
between 1,720 and 1,910 kt.
894 kt Up 7%
Escondida 528 kt Up 3% (100% basis)
HY23 834 kt
Increased production was primarily due to higher concentrator feed grade of
FY24e 1,720 - 1,910 kt 0.81%, compared to 0.79% in HY23 and higher concentrator throughput.
Concentrator feed grade is expected to be between 0.85% and 0.90% for FY24.
Production guidance for FY24 remains unchanged at between 1,080 and 1,180 kt.
Average realised price
Pampa Norte 138 kt Down 6%
US$3.66/lb Down 5%
Production at Spence increased 4% to a half year record of 127 kt, driven by
HY23 US$3.49/lb improved concentrator throughput.
Record concentrate production was partially
offset by lower cathode production, in line with
an expected decline in stacked feed grade. The
concentrator plant modifications which commenced
in August 2022 are expected to be completed in
FY24.
We approved an incremental US$570 m in sustaining
capital to progress remediation of previously
identified anomalies in the Spence Tailings
Storage Facility (TSF). These plans have been
developed with the Engineer of Record,
Independent Tailings Review Board and expert
consultants. This is the first stage to remediate
the TSF. Production guidance for Spence for FY24
remains unchanged at between 210 and 250 kt and
remains subject to successful remediation of the
TSF anomalies.
Cerro Colorado entered temporary care and
maintenance in December 2023, after producing 11
kt for the period.
Copper South Australia 154 kt Up 48%
Production increased by 51 kt due to the
additional volumes from Prominent Hill and
Carrapateena. Successful integration of the
Copper South Australia asset has resulted in
strong underlying operational performance,
including record quarterly copper production at
Carrapateena in Q2. Strong smelter performance at
Olympic Dam was supported by increased transfers
of concentrate from Prominent Hill for processing
to higher margin cathode. Olympic Dam also
delivered record half year gold production and
sales.
Production guidance for FY24 remains unchanged at
between 310 and 340 kt.
Crusher 2 at Carrapateena remains on track to
come online in Q3 FY24 and to ramp up in Q4 FY24.
We have also had continued success with
exploration drilling across the asset. Drilling
to date beneath the known Olympic Dam ore body
(OD Deeps) confirms attractive mineralisation
continuity at above 1% copper grade (refer to
Appendix 3). At Oak Dam, there are 12 active
drill rigs (up from 10) and the accommodation
camp is nearing completion.
Other copper
At Antamina, copper production decreased by 1% to
72 kt, while zinc production was 10% higher at 69
kt, both in line with planned concentrator feed
grades. Production guidance at Antamina remains
unchanged for FY24 with expected copper
production of between 120 to 140 kt and zinc
production of between 85 and 105 kt.
Carajas produced 3.0 kt of copper and 2.1 troy
koz of gold. Operations were stopped in August
due to a geotechnical event, and gradually
restarted in October. In Q3 FY24 operations will
continue to ramp back up with shipments also
expected to resume.
3
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BHP | Operational review for the half year ended 31 December 2023
Iron ore
Production Total iron ore production decreased by 2% to 129 Mt. Guidance for FY24 remains
unchanged at between 254 and 264.5 Mt.
129 Mt Down 2%
WAIO 126 Mt Down 3% | 142 Mt (100% basis)
HY23 132 Mt
Lower production due to the continued tie-in activity for the Rail Technology
FY24e 254 - 264.5 Mt Programme (RTP1), and the impacts of the ongoing ramp up of the Central Pilbara
hub (South Flank and Mining Area C).
South Flank is on track to ramp up
to full production capacity of 80 Mtpa (100%
Average realised price basis) by the end of FY24. The planned tie-in of
the Port Debottlenecking
US$103.70/wmt Up 21% Project (PDP1) is on track to be completed in CY24, following commissioning on
7 December 2023.
HY23 US$85.46/wmt
Production guidance for FY24 remains unchanged at
between 250 and 260 Mt (282 and 294 Mt on a 100%
basis).
Samarco 2.5 Mt Up 13% | 5.1 Mt (100% basis)
Production increased as a result of higher
concentrator throughput. Production guidance for
FY24 remains unchanged at between 4 and 4.5 Mt.
In December 2023, BHP Brasil approved up to
US$925 m in further financial support for the
Renova Foundation. The funding is for CY24 and
will be deducted from the Group's provision for
the Samarco dam failure.
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Coal
Metallurgical coal
Production BMA 11.3 Mt Down 17% | 22.6 Mt (100% basis)
11.3 Mt Down 17% On 15 January, a team member from BEP Engineering & Maintenance, a contracting partner to BMA,
was fatally injured in a vehicle incident at Saraji mine. Investigations are underway and we are
HY23 13.6 Mt working closely with the relevant authorities. Operations at Saraji were suspended and are
expected to progressively restart over the coming days.
FY24e 23 - 25 Mt
In the period, lower production was a result of a significant increase in planned maintenance
across the asset, the extended longwall move, and geotechnical faulting which
impacted underground operations at Broadmeadow until early November. Production
was also impacted by an increase in prime stripping to improve value chain
stability following depleted inventory positions arising from extended weather
impacts and labour constraints over recent years.
Average realised price Full year production guidance is now expected to be between 23 and 25 Mt (46 and
50 Mt on a 100% basis). This guidance excludes Blackwater and Daunia from the date
US$266.43/t Down 1% of completion of the divestment which is expected to occur on 2 April 2024. This
has been lowered from 28 - 31 Mt (56 and 62 Mt on a 100% basis), inclusive of
HY23 US$268.73/t Blackwater and Daunia.
Energy coal
Production NSWEC 7.5 Mt Up 36%
7.5 Mt Up 36% Increased production as a result of strong operating performance as eased
labour constraints and improved weather conditions enabled an uplift in truck
HY23 5.5 Mt productivity, with record annualised truck hours for the half. Domestic sales
under the NSW Government Coal Market Price Emergency (Directions for Coal
FY24e 13 - 15 Mt Mines) Notice commenced in Q4 FY23, which resulted in a lower proportion of
washed coal and contributed to the higher volumes.
Average realised price Production guidance for FY24 is expected to be at the upper end of the range of between 13 and 15 Mt.
US$123.29/t Up 65% We submitted a modification request to the NSW Government to extend mining
approval to 30 June 2030 in support of the 2030 closure plan. The modification
HY23 US$354.30/t submission went on public exhibition for four weeks in November 2023. The approval
process will continue through FY24.
Group & Unallocated
Nickel
Production Nickel West 40 kt Up 4%
40 kt Up 4% Production increased due to improved performance, and a shorter shutdown period
at the Kalgoorlie Smelter offsetting downtime at the Kwinana Refinery.
HY23 38 kt
Production guidance remains unchanged at between 77 and 87 kt for FY24.
FY24e 77 - 87 kt
The nickel industry is undergoing a number of structural changes and is at a
cyclical low in realised pricing. Nickel West is not immune to these challenges.
Average realised price Operations are being actively optimised, and options are being evalauted to mitigate
the impacts of the sharp fall in nickel prices. Given the market conditions, a carrying value
US$18,602/tDown 24% assessment of the Group's nickel assets is ongoing, and a further update will
be provided with the release of the financial results on 20 February 2024.
HY23 US$24,362/t
4
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BHP | Operational review for the half year ended 31 December 2023
Quarterly performance | Q2 FY24 v Q1 FY24
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Copper Iron ore
437 kt Down 4% Lower concentrator grade at Escondida and 66 Mt Up 4% Increased production at WAIO as a result
concentrator throughput at Spence, of the Q1 impacts of the RTP1
Q1 FY24 457 kt partially offset by higher volumes at Q1 FY24 63 Mt integration, planned equipment
Copper South Australia following planned maintenance and Central Pilbara hub
maintenance in Q1. ramp up.
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Metallurgical coal Energy coal
5.7 Mt Up 2% Production increased due to the lower 3.9 Mt Up 7% Higher production as a result of
planned wash plant maintenance, the ramp strong performance across the value
Q1 FY24 5.6 Mt up of the longwall at Broadmeadow, and Q1 FY24 3.6 Mt chain, largely drive by of strong
improved strip ratio. This was partially Q1 stripping performance, and the
offset by significantly increased opportune draw down of raw coal.
rainfall.
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Nickel
20 kt Down 3% Lower volumes due to downtime at the
Kwinana Refinery.
Q1 FY24 20 kt
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The following footnotes apply to this Operational Review:
1 Prior year comparatives do not include production volumes for the operations
acquired from OZL on 2 May 2023.
5
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BHP | Operational review for the half year ended 31 December 2023
Appendix 1
Average realised prices/1/
Q2 FY24 v HY24 v HY24 v
Q2 FY24 HY24 Q1 FY24 H2 FY23 HY23
--------- -------- ----------- --------- --------
Copper (US$/lb)/2,3,4/.............................. 3.68 3.66 1% (4%) 5%
Iron ore (US$/wmt, FOB)/5/.......................... 109.47 103.70 12% 4% 21%
Metallurgical coal (US$/t)/6/....................... 293.21 266.43 24% (2%) (1%)
Hard coking coal (US$/t)/7/...................... 305.69 274.99 26% 0% 2%
Weak coking coal (US$/t)/7/...................... 214.26 204.55 12% (18%) (19%)
Thermal coal (US$/t)/6,8/........................... 121.35 123.29 (3%) (22%) (65%)
Nickel metal (US$/t)................................ 16,812 18,602 (17%) (21%) (24%)
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 At 31 December 2023, the Group had 356 kt of outstanding copper sales that
were revalued at a weighted average price of US$3.87/lb. The final price of
these sales will be determined over the remainder of FY24. In addition, 342
kt of copper sales from FY23 were subject to a finalisation adjustment in
the current period. The displayed prices include the impact of these
provisional pricing and finalisation adjustments.
3 The large majority of copper cathodes sales were linked to index price for
quotation periods one month after month of shipment, and three to four
months after month of shipment for copper concentrates sales with price
differentials applied for location and treatment costs.
4 Does not include sales from assets acquired through the purchase of OZL.
5 The large majority of iron ore shipments were linked to index pricing for
the month of shipment, with price differentials predominantly a reflection
of market fundamentals and product quality. Iron ore sales for HY24 and Q2
FY24 were based on an average moisture rate of 6.7% (HY23: 6.8%).
6 The large majority of metallurgical coal and energy coal exports were linked
to index pricing for the month of scheduled shipment or priced on the spot
market at fixed or index-linked prices, with price differentials reflecting
product quality.
7 Hard coking coal (HCC) refers generally to those metallurgical coals with a
Coke Strength after Reaction (CSR) of 35 and above, which includes coals
across the spectrum from Premium Coking to Semi Hard Coking coals, while
weak coking coal (WCC) refers generally to those metallurgical coals with a
CSR below 35.
8 Export sales only. Includes thermal coal sales from metallurgical coal
mines.
Current year unit cost guidance
Previous Current
FY24 guidance/1/ FY24 guidance/1/
---------------- ----------------
Escondida unit cost (US$/lb)/2/............................... 1.40 - 1.70 1.40 - 1.70 Unchanged
Spence unit cost (US$/lb)..................................... 2.00 - 2.30 2.00 - 2.30 Unchanged
WAIO unit cost (US$/t)........................................ 17.40 - 18.90 17.40 - 18.90 Unchanged
BMA unit cost (US$/t)......................................... 95 - 105 110 - 116 Increased
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/
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Escondida/2/ 1,200 - 1,300 kt US$1.30 - $1.60/lb/3/
Spence/4/ ~250 kt
WAIO (100% basis) >305 Mt
