BHP share price on watch after ‘strong fourth quarter’

The BHP Group Ltd (ASX: BHP) share price will be on watch this morning.

This follows the release of the mining giant’s fourth-quarter and full-year production update.

BHP share price on watch after achieving guidance

The good news for the BHP share price today is that the Big Australian finished the year positively and achieved the majority of its guidance.

BHP’s iron ore production rose 8% quarter on quarter to 64.2Mt, bringing its full year production to 253.2Mt. This was flat on the prior corresponding period and in line with its guidance range of 249Mt to 259Mt.

The strong finish to the year was driven by higher volumes at WAIO, reflecting record production from the Mining Area C hub and the continued ramp up of South Flank and improved supply chain performance. Pleasingly, management expects to achieve its cost guidance for WAIO.

Things were even better during the quarter for BHP’s copper operations. Production rose 25% quarter on quarter to 461.8kt. This led to full year production of 1,573.5kt. While this was down 4% year on year it was in line with its guidance of 1,570kt to 1,620kt.

Management advised that this was driven by higher volumes at Escondida due to increased grade and concentrator throughput, higher volumes at Spence thanks to improved leaching performance, and a rebound at Olympic Dam following major smelter maintenance. Escondida cost guidance is expected to be achieved for the 12 months.

Elsewhere, full year metallurgical and energy coal production were in line with guidance at 29.1Mt and 13.7Mt, respectively.

Finally, one small disappointment was that BHP’s nickel production of 76.8kt missed guidance due to an unplanned smelter outage.

Management commentary

BHP’s chief executive officer, Mike Henry, was pleased with the quarter. He said:

BHP produced a strong fourth quarter to cap off a year of significant progress. Our performance for the year has been underpinned by safe, reliable operations and firm demand for our commodities.

We delivered record full-year sales volumes at our iron ore business in Western Australia as a result of reliable operational performance and the South Flank project which continued to ramp up. In copper, Escondida in Chile had record material mined and near-record concentrator throughput, while Olympic Dam in South Australia performed strongly in the fourth quarter after planned smelter maintenance.

Henry appears cautiously optimistic on the year ahead. He commented:

Broader market volatility continues and we expect the lag effect of inflationary pressures to continue through the 2023 financial year, along with labour market tightness and supply chain constraints. Over the year ahead, China is expected to contribute positively to growth as stimulus policies take effect, however, the continuing conflict in the Ukraine, the unfolding energy crisis in Europe and policy tightening globally is expected to result in an overall slowing of global growth.

Our strong focus on safety, operational reliability, cost control and social value will help us navigate these challenges and continue to deliver for all of our stakeholders.

FY 2023 guidance

BHP has provided investors with its production guidance for FY 2023.

This includes copper production of 1,635-1825kt, representing growth of 4% to 16% year on year, and largely flat iron ore production of 249Mt to 260Mt.

The post BHP share price on watch after ‘strong fourth quarter’ appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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