BHP (ASX:BHP) share price tumbles on Q1 update

This mining giant’s shares dropped on Tuesday. Here’s why…

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The BHP Group Ltd (ASX: BHP) share price was out of form on Tuesday and dropped into the red.

The mining giant’s shares ended the day 2% lower at $38.39.

Why did the BHP share price tumble?

Investors were selling down the BHP share price today following the release of its first quarter update.

For the three months ended 30 September, the Big Australian recorded production declines across the majority of its operations.

For example, the company’s iron ore production was down 3% quarter on quarter and 4% year on year to 63.3Mt. Management blamed this on planned major maintenance and the COVID-induced impacts of temporary rail labour shortages.

Also recording a decline was its copper production, which was down 7% quarter on quarter and 9% year on year to 376.5kt. This was the result of lower volumes at Olympic Dam from planned (but delayed) smelter maintenance.

One highlight, which failed to lift the BHP share price, was its petroleum production. BHP’s petroleum production grew 2% quarter on quarter and 3% year on year to 27.5 MMboe. This was driven by increased production from Ruby and higher seasonal gas demand at Bass Strait.

The company also revealed that the proposed merger of its petroleum business with Woodside Petroleum Limited (ASX: WPL) is progressing to plan. But once again, this had little impact on the BHP share price.

FY 2022 guidance

Not even management reaffirming its guidance for FY 2022 could save the BHP share price from sliding lower today. This could be an indication that the market has doubts that it will deliver on its guidance after this subdued quarter.

BHP is guiding to iron ore production of 249Mt to 259Mt, copper production of 1,590kt to 1,760kt, and petroleum production of 99MMboe to 106MMboe.

What was the response?

The team at Macquarie Group Ltd (ASX: MQG) felt the update was soft but were pleased to see its guidance remain unchanged.

It commented: “Importantly, guidance for all key commodities is unchanged with maintenance programs the key driver behind the metallurgical coal weakness.”

Macquarie currently has an outperform rating and $56.00 price target on the company’s shares.

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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 owns shares of and has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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