BHP Trims Iron Ore Production Forecast on Car Dumper Issues

- April 19th, 2018

BHP’s iron ore production targets have been reduced following maintenance issues and a cyclone that battered port facilities.

Transport maintenance issues are dampening projections for BHP Billiton’s (ASX:BHP,LSE:BLT,NYSE:BHP) iron ore output in 2018.

The Anglo-Australian miner cut its iron ore production guidance by 2 percent to 272 to 274 million tonnes, down from 275 to 280 million tonnes, due to “car dumper reliability issues.”

The machinery is involved with loading and unloading train cars of cargo.

In its operational review for the nine months ended March 31, the company explained that efforts to increase levels of production were also hampered by Cyclone Joyce, which battered Western Australia’s Pilbara coast in January, affecting BHP’s port facilities there.

According to BHP, the world’s biggest mining company, the two factors reduced production “despite improved rail reliability and an increase in peak performance in the number of rakes per day.”

Works are underway to clear the current constraints imposed by the reliability issues, the company said.

BHP has also received permission to increase capacity at its Port Hedland operations to 290 million tonnes of iron ore per year. The company expects to reach this output rate by the end of the 2019 financial year.

Analysts at Investec said in a report that BHP’s weaker iron ore performance was surprising. “BHP will need to get such issues in order, given it has now received … approval to expand capacity.”

The company’s iron ore output increased 8 percent year-on-year to 67 million tonnes in the three months ended March 31, but declined 6 percent compared to the previous quarter.

Analysts at Sydney-based brokerage Shaw and Partners said in a report that overall production for the third quarter was balanced as lower iron ore output and guidance should be offset by an overall increase of 37 percent in copper production, with a large boost coming from Escondida in Chile.

Production at Escondida, the world’s largest copper mine, increased by a huge 64 percent to 897 kilotonnes.

Meanwhile, Olympic Dam copper production fell by 18 percent to 95 kilotonnes “as a result of the planned major smelter maintenance campaign in the first half of the financial year.”

That said, BHP narrowed its full-year copper guidance to 1.7 to 1.785 million tonnes from the earlier range of 1.655 to 1.79 million tonnes.

On Thursday (April 19), BHP’s share price was trading up 2.83 percent on the ASX at AU$30.92, as the mining sector saw increases across the board following last week’s disruptions to the aluminum supply chain due to US sanctions.

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Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.

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