By David Winning 
 

SYDNEY--BHP Group Ltd. is reviewing spending plans for the 2021 fiscal year as the coronavirus pandemic disrupts operations producing commodities from copper to coal.

BHP said capital and exploration expenditure in fiscal 2021, which begins in July, would be lower than the US$8 billion that management had originally signalled. A year-long delay to the Scarborough natural gas development offshore Australia has already been announced, and BHP said there was another US$200 million in non-committed spending on petroleum projects that could be deferred.

Like many global resources companies, BHP is facing the twin threat of weakening demand for commodities as global economic activity slows with changes to the way it operates mine sites across the world. In response to the coronavirus pandemic, BHP has reduced the number of people on site at its mines, including halving its contractor workforce in Chile where it runs the Escondida and Spence copper pits.

"While demand in China has strengthened in recent weeks, we expect other major economies, including the U.S., Europe and India, to contract sharply in the June 2020 quarter," Chief Executive Mike Henry said. "The situation remains fluid, however, with our strong financial position and low-cost operations, our business is resilient, with capacity to generate solid cash flow through his period and emerge well placed as the global economy recovers."

BHP said it produced 60 million metric tons of iron ore in the three months through March, up 7% on the same period a year ago. Volumes were kept high despite a tropical cyclone that tore through Western Australia and travel restrictions that disrupted its use of fly in-fly out workers.

On Tuesday, management stuck with annual guidance for between 242 million tons and 253 million tons from its Pilbara operations. BHP's Australian iron-ore shipments account for almost one-fifth of seaborne trade in the commodity. It is the world's third-largest iron-ore exporter, behind Vale SA and Rio Tinto PLC.

However, BHP said annual production guidance for some other divisions is under review. In copper, BHP said it is assessing the impact of the temporary suspension of its Antamina operation in Peru as a result of coronavirus restrictions. Energy coal output guidance is also being reviewed after the Cerrejón mine was placed on temporary care and maintenance due to the pandemic.

BHP said third-quarter output of petroleum products fell by 13% on-year to 25 million barrels of oil equivalent. That reflected the impact of Tropical Cyclone Damien on the North West Shelf gas-export facility in Australia in early February, which led management to signal that annual petroleum output would be at the lower end of fiscal 2020 guidance of between 110 million barrels and 116 million barrels.

"Potential impacts from Covid-19, including weakness in customer demand, in the June 2020 quarter represent possible downside risk to full year guidance," BHP said on Tuesday.

Quarterly copper output totaled 425,000 tons. BHP said first production from an expansion of its Spence copper mine could be pushed back by a few months after fewer workers were allowed on site.

 

Write to David Winning at david.winning@wsj.com

 

(END) Dow Jones Newswires

April 20, 2020 19:17 ET (23:17 GMT)

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