Shares in BHP, which is disposing of its interest in two metallurgical mines in Australia for $4.1 billion (R78bn), were marginally lower on the JSE yesterday after the diversified resource group said it was on course to meet its production and cost guidelines in a September quarterly update.
The company’s stock on the JSE traded 0.3% in the red at R545.24 and is 5% lower compared to six months ago. BHP said it had agreed, together with Mitsubishi Development, to dispose of the Blackwater and Daunia metallurgical coal mines for $4.1bn, payable as $2.1bn in cash and $1.1bn over three years.
Whitehaven Coal, which has agreed to buy the two mines, will pay the remaining $900m under a price-linked earn out over a three-year period. Proceeds from the disposal of the two mines will be used to reduce BHP’s group net debt.
“Whitehaven Coal has a strong track record as a responsible and reliable operator, and we will work closely with them to achieve a smooth change of ownership focused on maintaining safe and productive operations and supporting people and communities through the transition. In line with our long-term strategy, we will continue to develop our high-quality metallurgical coal assets in Queensland, which are sought after by global steelmakers and needed to support the energy transition,” said Geraldine Slattery, BHP’s president for Minerals Australia.
The group’s metallurgical coal production for the quarter to the end of September dipped 16% to 5.6 million tons, BHP reported. The average realised price was also 13% down for the quarter at $237 per ton.
The lower production has been attributed to “planned wash plant maintenance at Goonyella, mining in higher strip ratio areas, an extended long wall move at Broadmeadow, and a stoppage” at Peak Downs.
This had been partially offset by strong underlying truck productivity and favourable weather conditions. The BMA unit had also opened the period with low inventory levels compared to an inventory drawdown in the prior year due to wet weather.
Energy coal was, however, up 38% in terms of output at 3.6 million tons, driven by favourable weather conditions and eased labour constraints, which enabled record annualised truck hours for the quarter. BHP is maintaining its guidance for both energy and metallurgical coal production for the full year period.
Copper was, however, a top performer for the group during the September 2023 quarter, CEO, Mike Henry said. Copper output registered an 11% uplift for the period under review compared to the prior year contrasting period.
“After completing a typically busy quarter of planned maintenance particularly at our Australian assets, we are on track to achieve full year production and unit cost guidance. In South Australia, we saw strong operational performance in the first full quarter of production for the new province, as we bring our copper assets together and progress further exploration drilling,” said Henry.
Although iron ore production for BHP decreased by 3% to 63 million tons, the company is also maintaining its guidance for the full year at 254 and 264.5 million tons. In terms of coal output, BHP saw production dip by 2% to 20.2 000 tons against a 14% lowering in the average price realised at $20 354 per ton.