BHP bumps up 2020-21 iron ore guidance on Samarco restart, softens met coal outlook
Mining giant BHP bumped up its fiscal 2020-2021 (July-June) iron ore production guidance following the restart of its joint venture Brazilian Samarco operation, while its metallurgical coal output is expected to be in the lower end of the forecast range due to weather impact.
BHP now expects iron ore production of 245 million-255 million mt for the current fiscal year, which is up from the previous range of 244 million-253 million mt. The added tonnes are all due to Samarco, while BHP’s Western Australian Iron Ore guidance has remained unchanged at 276 million-286 million mt, the company said Jan. 20.
While 1 million-2 million mt from Samarco — which restarted in December 2020 after being offline since November 2015 due to dam failure — is expected by the end of the fiscal year, the operation is expected to ramp up to 8 million mt/year for the longer term, BHP said in the half year report.
BHP reported its share of iron ore production of 62.39 million mt (70.4 million mt on a 100% basis across the assets) for the October-December quarter, which is up 3% year on year and down 6% from the July-September period.
Analysts at RBC Capital Markets and J.P.Morgan each said in research notes Jan. 20 that the 100% basis quarterly figure fell below their forecasts, which were both at 72 million mt.
BHP’s metallurgical coal production, which is focused in the Australian state of Queensland, was hit by wet weather that softened the company’s outlook for fiscal 2020-2021, while it continues to monitor for any potential volume impact from restrictions on coal imports into China.
The miner’s 2020-2021 met coal output is expected to be at the lower half of the guidance range of 40 million-44 million mt for its equity share, and 71 million-77 million mt on a 100% basis.
That came after BHP’s December quarter production of 9.52 million mt, down 13% year on year and 2% from the July-September quarter. On a 100% basis, the production was 17.1 million mt.
Again, this fell short of both RBC’s and J.P.Morgan’s forecasts, with the former having expected total production of 19.2 million mt and the latter 10.8 million mt for BHP’s share.
Firmer iron ore prices over July-December, weaker met coal
BHP’s realized iron ore price for the July-December period was $103.78/mt FOB, up 33% year on year and 35% from January-June.
Metallurgical coal fetched $97.61/mt, having slumped 31% year on year and 19% versus the prior six months. The met coal price was made up of $106.3/mt for hard coking coal, which dropped 31% from the same time last year and 19% from the January-June period. Weak coking coal was recorded at $73.17/mt for the half, down 28% year on year and 13% from January-June, BHP said.
RBC said the iron ore price fell below their forecast of $110/mt while hard coking coal was in line.