BHP share price: September production update in focus

Though BHP’s CEO described the company’s latest update as ‘solid’, the company saw a number of declines across its key production areas, including iron ore.

BHP share price: the iron ore story

Though BHP (ASX: BHP) has diverse operations – spanning petroleum, copper and nickel – it is iron ore that remains its most important. Indeed, as we wrote previously heading into BHP’s FY19 results: 41% of the Group's 1H earnings (EBITDA) came from the company’s iron ore operations.

By the second-half of FY19 this figure blew out to 48%.

With such facts in mind, the mining giant today reported September Q19 iron ore production of 61 million tonnes, or 69 million tonnes on a 100% basis. This represents a 1% decrease on a quarter-over-quarter basis and a more sizable 3% decrease since the June 2019 quarter.

Speaking of these front-line figures, BHP commented that:

‘Volumes at Western Australia Iron Ore (WAIO) [came in] lower due to the significant planned maintenance at Port Hedland,’ while reiterating that ‘guidance for the 2020 financial year remains unchanged at between 242 and 253 Mt (273 and 286 Mt on a 100 per cent basis).

Speaking to the results from some of BHP’s other core products during the September quarter: petroleum production dropped 1%, copper production decreased 3% and nickel production fell a more significant 25%.

BHP CEO comments

Speaking of today’s quarterly update, BHP’s CEO Andrew Mackenzie maintained that:

‘We delivered a solid start to the 2020 financial year through ongoing strong operational performance across our portfolio.'

Speaking to the lag in Group production figures, Mr Mackenzie noted that:

'While Group production for the quarter decreased slightly due to the expected impacts of planned maintenance and natural field decline in Petroleum, guidance remains unchanged and we are on track to deliver slightly higher volumes than last financial year.'

It looks as if BHP investors potentially didn’t believe today’s market update to be quite-so-solid. By late afternoon, the BHP share price had been bid down some 3.02% to A$34.95 per share.

The potash equation

Besides standard production figures, the company also made the key announcement that:

'The Jansen Stage 1 potash project in Canada will be presented to the Board for final investment decision by February 2021. In order to make a final investment decision, work on engineering to support project planning and on finalising the port solution is required.'

BHP’s board has already approved $144m to fund these activities, mind you.

Ultimately, a stellar share price run spurred on by rising iron ore prices at the start of this year have mostly been undone by now. Iron ore prices have indeed settled down and currently hover around the $90 per tonne mark.

YTD the BHP share price has now risen just 3.77%, lagging the ASX 200 significantly.


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