The local market may be pushing notably higher on Wednesday but the same cannot be said for the BHP Billiton Limited (ASX: BHP) share price.
In late morning trade the mining giant’s shares are down 1% to $33.57 following the release of its quarterly update.
What was in the update?
In the first quarter of FY 2019 BHP’s operations were reasonably mixed in comparison to the prior corresponding period.
Petroleum production fell 1% to 33 MMboe during the quarter. Higher natural gas volumes at Trinidad and Tobago were offset by natural field decline and planned maintenance at Pyrenees.
Copper production rose 1% to 409 kt. Higher volumes at Escondida were driven by the utilisation of the three concentrators, but offset by the impact of planned maintenance and a fire at its Spence operation and an acid plant outage at Olympic Dam.
Iron ore production was the highlight of the quarter, rising 10% on the prior corresponding period to 61 Mt. Management advised that this was driven by higher volumes at WAIO supported by record quarterly production at Jimblebar and improved reliability across its rail network and port operations.
Metallurgical coal production was down 2% to 10 Mt and energy coal production fell 1% to 7 Mt. Planned maintenance hit its metallurgical coal production and a higher average strip ratio impacted energy coal production.
Management has held firm with its full year production guidance for all segments except copper. Copper production guidance has been reduced to between 1,620 and 1,705 kt from the range of 1,675 to 1,770 kt.
BHP chief executive officer, Andrew Mackenzie, explained that the reduction has been made due to outages at Olympic Dam in Australia and Spence in Chile.
Unit cost guidance has been maintained for all major assets for the 2019 financial year and all major projects under development are tracking to plan.
Something else that is tracking to plan right now is its U.S. onshore shale asset divestment. Mr Mackenzie advised that the “Onshore US sale process is progressing to plan and is expected to be completed by the end of October 2018.”
No other details were provided on the sales or its plans for the funds raised.
Should you invest?
I thought this was a solid quarter from BHP and believe it is likely to have resulted in bumper free cash flow generation once again. Barring a collapse in commodity prices, this should put the miner in a position to deliver another strong profit result and continue paying a generous dividend in FY 2019.
Because of this, I continue to see BHP as a great option for investors looking to gain exposure to the resources sector. I would pick it ahead of Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG).
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.