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BHP Trims Annual Iron Ore Target After Cyclone

BHP Group warned of slightly higher iron-ore mining costs after flooding in the wake of a cyclone last month.

The company reported that production of the steel ingredient from its mines in Australia’s remote Pilbara region slipped in the last quarter. It cut its annual output target, affirming an expected 6 million to 8 million metric ton impact from Tropical Cyclone Veronica last month.

While BHP’s scaled-back guidance was relatively modest, it adds to the hits to iron shipments which have supported market prices. Iron ore prices rallied this year following output cuts by Vale SA in Brazil after a dam disaster. On Tuesday, Rio Tinto warned of ongoing problems shipping iron ore from its port in Western Australia after damage from the cyclone, prompting it to also reduce its production target for the year.

BHP, the world’s biggest mining company by market value, said it now expects production from the mines in controls in Pilbara of between 265 million and 270 million tons in the year through June, below its earlier target of 273 million-283 million.

While Veronica caused no major damage to BHP’s facilities, efforts to ramp up shipments from its port in Western Australia were slowed by flooding and assessments of its equipment. With lower volumes, including a 3% fall in its iron ore output to 56.1 million tons in the latest quarter, it now expects higher iron ore production costs. It forecasts the cost of producing a ton of iron ore for the full year to be below US$15, compared with less than US$14 previously.

BHP, which has in recent years focused on cutting costs and narrowing in on operations with a longer lifespans, had flagged a stronger second-half performance after setbacks in the first six months of the financial year. These included disruptions after a train derailment in a remote part of Australia, an acid-plant outage at the company’s Olympic Dam copper mine in Australia and a plant fire at its Spence mine in Chile.

Chief Executive Andrew Mackenzie said the mining company achieved a strong operational performance in the last quarter despite the impact of adverse weather in Australia and Chile. BHP maintained production guidance for its petroleum, copper and coal operations and said all major projects under development were tracking to plan.

Oil and gas output in the three months through March hit 29 million barrels of oil equivalent, a rise of 3% year-over-year, while production of energy coal was up 11% to 7 million tons. However, steel-making metallurgical coal production was down 5% on-year at 10 million tons, and copper production fell 8% to 420,000 tons.
Source: Dow Jones

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