BHP share price on watch amid Q1 production miss

The BHP Group Ltd (ASX: BHP) share price will be one to watch on Wednesday.

This follows the release of the mining giant’s first quarter update this morning.

BHP share price on watch following Q1 update

Much like rival Rio Tinto Limited (ASX: RIO) yesterday, BHP’s production appears to have fallen short of expectations during the last quarter.

For the three months ended 30 September, BHP reported copper production of 410.1kt. This was down 11% from the June quarter and short of the consensus estimate of 429kt.

Management advised that lower volumes at Escondida were due to lower concentrator feed grade, lower ore stacked in prior months at Pampa Norte reducing cathode production, and lower volumes at Olympic Dam as a result of planned refinery maintenance.

BHP’s iron ore production for the quarter came in 1% higher at 65.1Mt. However, despite this growth, it will have been hard for the company to achieve the consensus shipments estimate of 72.3Mt for the three months.

Management advised that the strong operational performance at WAIO was partially offset by planned car dumper maintenance in the quarter.

Given the sky high prices that coal is commanding right now, the market may be disappointed to learn that significant wet weather weighed on its production during the quarter.

Metallurgical coal production was down 19% to 6.7Mt (versus consensus est. 7.6Mt) and energy coal was down 33% to 2.6Mt.

Finally, the company’s nickel production came in at 20.7Mt. While this was up 10% quarter on quarter, it was still a touch short of the consensus estimate of 21.1Mt.

Management commentary

BHP’s chief executive officer, Mike Henry, was pleased with the company’s start to the new financial year. He commented:

We have started the new financial year strongly, achieving safe and reliable operating performance. The first quarter included significant planned major maintenance in Western Australia Iron Ore (WAIO), BHP Mitsubishi Alliance (BMA), and Olympic Dam.

Copper production was up nine per cent on the same quarter last year, with strong concentrator throughput at Escondida and record quarterly anode production at Olympic Dam. WAIO continued to perform strongly, with production up by 3% relative to the same period last year, and we managed through substantial rainfall and labour constraints in our coal assets with production only down marginally year on year.

Outlook

One positive that could support the BHP share price today is that management has reaffirmed all production and cost guidance for FY 2023.

For example, iron ore production guidance remains 249Mt to 260Mt, copper production remains 1,625kt to 1,825kt, and met coal production guidance remains 58Mt to 64Mt.

Henry concludes:

We expect global macro-economic uncertainty in the short term to continue to affect supply chains, energy costs, labour markets and equipment and materials availability. BHP remains well positioned, with a portfolio and balance sheet to withstand external challenges and a strategy positioned to benefit from the global mega-trends of decarbonisation and electrification.

The post BHP share price on watch amid Q1 production miss 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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