Prices wilting
4Q22 Production:
Need to know:
- Flat full year FeO production at WAIO, FY23f guidance -2% to +3%
- Average prices achieved varied: Cu +9%, FeO -13%, metallurgical coal +225%, Ni +43%
- China stimulus helps, but global slowdown hinders
Investment Implications:
Total iron ore production of 283mt (100% basis) was flat on last year and is guided to 278-290mt in FY23f. Faster ramp up of South Flank contributed to record production for Mining Area C, offsetting declines in Yandi and Jimblebar.
Copper production for FY22 was 1,574mt, down 4% on last year. Production is expected to lift to 1,080-1,180mt in FY23f with medium term guidance still 1.2mtpa over the next 5 years.
Average achieved commodity prices were mixed throughout FY22. Global market volatility and inflationary pressures are pulling commodity prices down. In contrast, Chinese government stimulus is supporting iron ore prices to some extent. As of 31 December 2021, BHP’s FY22 EBITDA sensitivity to a US$1/t change in the iron ore price was US$119m. A US1c/A$ movement was the second largest sensitivity at US$57m EBITDA for FY22f.
Unit costs for WAIO, Escondida and NSWEC are expected to be in line with full year guidance. Energy coal unit costs are expected to be at the lower end of guidance as the company targets production of higher quality coal to capture record high prices.
BHP has retained its NSWEC portfolio after failing to sell it. The company is seeking an extension of current mining approvals prior to a shut down of mining in 2030.
The Jansen potash project is attempting to bring forward first production into 2026 and looking at accelerating Stage 2 options.
This commentary reflects our initial view. For detailed reports for companies under Sandstone Insights coverage, see our latest research notes for our investment view and specific risks associated with investing in these companies.
Stock overview
Share price
Company overview
BHP Group is a global commodities producer including iron ore, metallurgical coal, copper, gold, silver, uranium oxide, lead, zinc, cobalt, molybdenum, manganese, thermal coal, petroleum products and potash.
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