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BHP's Iron Ore Q3 Output Up 3% Y/Y, FY24 View Maintained

BHP Group BHP announced that its iron ore production rose 3% year over year to 61.5 Mt in the third quarter of fiscal 2024 (ended Mar 31, 2024). This was attributed to a 3% rise in iron ore output at Western Australia Iron Ore (WAIO).

In the first nine-month period of 2024, iron ore production was recorded at 191 Mt, down 1% year over year. This decline can be attributed to heavy rainfall in the third quarter of fiscal 2024,  the continued tie-in activity for the Rail Technology Program, the impacts of the ongoing ramp-up of the Central Pilbara hub (South Flank and Mining Area C) and a bushfire near Yandi.

BHP stated that South Flank is on track to ramp up to a full production capacity of 80 Mt per year (100% basis) by the end of fiscal 2024.

Copper Output Up 15% in Q3: Total copper production in the third quarter of fiscal 2024 rose 15% year over year to 466 kt. This brings the copper production total to 1,360 kt for the first nine-month period of fiscal 2024, which marks 10% growth year over year.  This reflects strong performance and additional tons from Copper South Australia, record year-to-date performance from Spence, as well as improved grades and production at Escondida.

Production at Escondida was up 7% year over year to 816 kt in the first nine-month period of fiscal 2024. Copper output at Pampa Norte declined 9% to 200 kt in the first nine-month period compared with year-ago levels. Cerro Colorado entered temporary care and maintenance in December 2023. Spence continues to perform well with its output attaining a nine-month record of 189 kt, mainly driven by improved concentrator throughput and higher recoveries.

Production from Copper South Australia surged 49% to 233 kt in the first nine-month period of fiscal 2024, driven by additional contributions from Prominent Hill and Carrapateena. Antamina’s copper production rose 4% to 106 kt in the first nine months of fiscal 2024.

Nickel Production Down 4% in Q3: Nickel production was down 4% year over year to 18.8 kt during third-quarter fiscal 2024. In the first nine months of fiscal 2024, nickel output was 58.6 kt, which was 1% higher than the year-ago comparable period.

Energy Coal Up, Metallurgical Coal Plunges: Energy coal production rose 5% year over year to 4.1 Mt in the third quarter of fiscal 2024. In the first nine months of fiscal 2024, production improved 23% year over year to 11.6 Mt owing to strong operating performance.

Metallurgical coal production was 6 Mt, down 13% compared with the year-ago quarter. Production in the first nine months of fiscal 2024 was 17.4 Mt, which was 16% lower than the year-ago levels due to planned maintenance, an extended longwall move, as well as increased stripping to improve supply-chain stability.

Prices: In the third quarter of fiscal 2024, average realized prices for iron ore were down 3% to $106 per ton. Copper prices were up 5% sequentially to $3.85 per pound. Average nickel prices were $16,581 per ton, down 1% sequentially. Prices for thermal coal dipped 4% sequentially to $116.11 per ton and metallurgical coal prices were down 4% sequentially to $281.51 per ton.

FY24 Production Guidance

BHP’s iron ore production guidance for fiscal 2024 is 254-264.5 Mt. WAIO's production is expected to be between 250 Mt and 260 Mt (282 Mt and 294 Mt on a 100% basis).

BHP expects copper production within 1,720-1,910 kt in fiscal 2024. Production guidance for metallurgical coal has been lowered to 21.5-22.5 Mt from the previous expectation of 23 -25 Mt. The production guidance for energy coal is 13-15 Mt. Nickel production is expected to be near the lower half of the range of 77 kt and 87 kt.

Cost Guidance for FY24

Unit cost guidance for WAIO is $17.40-$18.90 per ton. Escondida unit cost is estimated to be $1.40-$1.70 per pound. Spence unit costs are expected to range between $2.00 per pound and $2.30 per pound. BMA unit cost is expected to be between $119 per ton and $125 per ton, higher than the prior stated range of $110-$116 per ton.

Other Updates

BHP and Mitsubishi Development Pty Ltd, on Apr 2, announced the completion of the divestment of the Blackwater and Daunia mines to Whitehaven Coal.  Daunia and Blackwater were part of the BHP Mitsubishi Alliance (BMA) metallurgical coal joint venture in Queensland. Each of BHP and MDP holds a 50% interest in BMA.

Peer Performances

Vale S.A. VALE reported iron ore production of 70.8 Mt for the first quarter of 2024, which was up 6% year over year, attributed to improved operating performance at the S11D mine and higher third-party purchases. Vale’s iron ore production guidance for 2024 is 310-320 Mt.

Vale produced 81.9 kt of copper in the quarter, which marked 22.2% year-over-year growth, benefiting from the steady ramp-up of Salobo 3 as well as better performance at Salobo’s 1 & 2 plants.

Rio Tinto Group RIO reported a 2% decrease in its first-quarter 2024 iron ore production to 77.9 Mt (on a 100% basis) as planned ore depletion, predominantly at Yandicoogina, was partially offset by productivity gains across other operations.

Shipments for the quarter (on a 100% basis) were reported at 78 Mt, marking a 5% year-over-year drop. This was due to weather disruption at the ports as well as lower output at the mines. RIO expects Pilbara iron ore shipments (100% basis) between 323 Mt and 338 Mt in 2024. The midpoint of the range indicates a year-over-year dip of 0.4%.

Rio Tinto’s copper production was 156 thousand tons (on a consolidated basis), which was 7% higher than the year-ago quarter.

Price Performance

BHP’s shares have declined 7.6% in a year against the industry’s 3% growth.

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Zacks Rank & Another Key Pick

BHP currently carries a Zacks Rank #3 (Hold).

A better-ranked stock in the Basic Materials space is Carpenter Technology Corporation CRS, which carries a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Carpenter Technology’s 2024 earnings is pegged at $4.00 per share. The consensus estimate for 2024 earnings has moved 1% north in the past 60 days. It has an average trailing four-quarter earnings surprise of 14.3%. CRS shares have gained 68% in a year.

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