BHP Reviews Spending Plans as Coronavirus Disrupts Some Operations
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
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
Write to David Winning at email@example.com
(END) Dow Jones Newswires
April 20, 2020 19:17 ET (23:17 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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