BHP Group BHP reported production details for the year ended Jun 30, 2022, and provided guidance for fiscal 2023. Total iron ore production for fiscal 2022 was 253 Mt (million tons), flat year on year and within its guidance of 249-259 Mt. The company met production guidance for copper, energy coal and metallurgical coal but missed the same for nickel due to a smelter outage in the June 2022 quarter.BHP’s copper production in fiscal 2022 was down 4% year over year to 1,573.5 kt. Metallurgical coal production decreased 9% to 29.1 Mt, while energy coal production was 13.7 Mt, down 4% year over year. Nickel production declined 14% year over year to 76.8 kt.Average realized prices for thermal coal and metallurgical coal for fiscal 2022 soared 271% and 225%, respectively. Average realized prices for nickel and copper surged 43% and 9%, respectively. However, iron ore prices declined 13%.
Quarterly Production & Peer Performances
In the April-June quarter, BHP’s iron ore production was down 2% year over year to 64.2 Mt. However, production improved 8% on a sequential basis, primarily due to enhanced performance at Western Australia Iron Ore (WAIO). This was driven by record production from the Mining Area C hub with the continued ramp-up of South Flank and improved supply chain performance.Brazilian miner Vale S.A. VALE reported its iron ore production for the second quarter of 2022 at 74.1 Mt, which came in 1.2% lower than the year-ago quarter but 17% higher than the first quarter of 2022.Vale lowered its iron ore production guidance for 2022 to 310-320 Mt citing the sale of the Midwestern System. Vale mentioned that it is adjusting production levels according to the current market conditions, and this decision is in sync with its “value over volume” philosophy/mantra.Last week, Rio Tinto Group RIO reported a 4% increase in second-quarter iron ore production to 78.6 Mt. Despite the impact of higher-than-average rainfall in May, continued focus on mine pit health and commissioning of Gudai-Darri supported production during the quarter under discussion.Rio Tinto’s iron production in the first half of this year was 150.3 Mt, 1% lower than the prior year. This was primarily due to the 6% decline reported in its first quarter production to 71.7 Mt.
Fiscal 2023 Guidance
BHP’s iron ore production guidance for fiscal 2023is at 249-260 Mt. The mid-point of the range indicates growth of 1% from fiscal 2022. WAIO production is expected between 246 Mt and 256 Mt (278 Mt and 290 Mt on a 100% basis), reflecting the tie-in of the debottlenecking port project and the continued ramp up of South Flank.The company expects copper production within 1,635 kt and 1,825 kt, suggesting a 10% year-on-year growth at the mid-point. Production guidance of Metallurgical coal is at 29-32 Mt compared with 29.1 Mt reported in fiscal 2022. The guidance for energy coal production is at 13-15 Mt. Nickel production for fiscal 2023 is expected between 80 kt and 90 kt, higher than the production of 76.8 kt reported in fiscal 2022.
Other Key Developments
The divestment of BHP’s 80% interest in BHP Mitsui Coal Pty Ltd (“BMC”) to Stanmore Resources was completed in May. The merger of BHP’s oil and gas portfolio with Woodside Energy was completed on Jun 1.BHP announced that it is retaining its New South Wales Energy Coal (“NSWEC”) unit and plans to continue mining up to the end of fiscal 2030. With the mining consent for the operation to expire in 2026, BHP is currently working toward acquiring the relevant approvals for the same.As of Jun 30, 2022, the company had one major project under development — the $5.7 billion Jansen Stage 1 project. It is tracking according to plan, and BHP is expecting to bring the first production forward to 2026.
Price PerformanceZacks Investment Research
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BHP’s shares have fallen 31.1% in a year, compared with the industry’s decline of 24.3%.
Zacks Rank & a Key Pick
BHP currently carries a Zacks Rank #5 (Strong Sell).
A better-ranked stock in the basic materials space is Albemarle Corporation ALB, which carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Albemarle has a projected earnings growth rate of 231.7% for the current year. The Zacks Consensus Estimate for ALB’s current-year earnings has been revised upward by 26.5% in the past 60 days.
Albemarle’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 20%. ALB has gained roughly 11% in a year.
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