By David Winning 
 

SYDNEY--BHP Group Ltd. said it achieved annual production guidance for most of its major commodities despite disruption caused by the coronavirus pandemic.

BHP said it produced 67 million metric tons of iron ore in the three months through June, up 11% on the previous quarter. That brought annual production to 248 million tons, which is 4% higher than in the 2019 fiscal year.

Like rival Rio Tinto PLC, BHP's iron-ore business has benefited from supply disruptions in Brazil where some mining hubs were forced to shutter temporarily to contain the spread of the novel coronavirus. In addition, miners have recently got a tailwind from a rapid economic recovery in China, where nearly 90% of steel is used domestically.

On Tuesday, BHP said Chinese domestic industrial activity has been improving, as authorities loosened access to credit and introduced fiscal stimulus. Still, management said the potential for a second wave of virus infections in China is a key risk.

BHP said its production of metallurgical coal, also used to make steel, rose by 26% in the June quarter to 12 million tons. However, annual output of metallurgical coal fell by 3% to 41 million tons.

Quarterly copper production fell by 3% to 414,000 tons compared with the March quarter, although full-year production was up 2% at 1.7 million tons. BHP said copper volumes are expected to be slightly lower in the 2021 fiscal year, partly due to the impact of a headcount reduction at mine sites in response to the pandemic.

"Our diversified portfolio and high quality assets, together with our strong balance sheet, make us resilient to the ongoing uncertainty in the markets for our commodities," said Chief Executive Mike Henry. "We expect to continue to generate solid cash flow through the cycle and we remain confident in the outlook for demand for our products over the medium to long-term."

BHP said it expected to achieve full-year unit cost in its Australian iron-ore business, the Queensland Coal division, and its energy-coal business in New South Wales state. However, unit costs in petroleum and at the Escondida copper mine in Chile are expected to be slightly above guidance.

The miner outlined two new exceptional items that it expects to record in its results for the 2020 fiscal year. BHP said it would book an impairment charge of US$450 million-US$500 million tied to property, plant and equipment at Cerro Colorado. It also said costs directly tied to the pandemic would be recorded as a US$100 million-U$150 million exceptional item.

 

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

 

(END) Dow Jones Newswires

July 20, 2020 19:09 ET (23:09 GMT)

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