BHP (ASX:BHP) share price on watch following second quarter update

BHP’s shares will be in focus today following its update…

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Key points

  • BHP has handed in its second quarter report card
  • The Big Australian delivered almost record high iron ore production
  • COVID-19 labour shortages are being experienced and impacting its performance

The BHP Group Ltd (ASX: BHP) share price will be on watch on the ASX 200 on Wednesday.

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

BHP share price on watch following second quarter update

All eyes will be on the BHP share price today after it released its highly anticipated second quarter update.

For the three months ended December, BHP’s iron ore production grew 4% quarter on quarter to a near record of 66.1Mt. This brought its half year production to 129.1Mt. Management advised that the higher volumes reflect strong supply chain performance, increased ore car availability, and the continued ramp up of South Flank. This was partially offset by the impact of temporary rail labour shortages due to COVID-19 related border restrictions

Things weren’t quite as positive for BHP’s copper production, which fell 3% quarter on quarter to 365.5kt. This led to a 12% decline in production to 742kt for the first half. This was driven by lower volumes at Olympic Dam due to the planned smelter maintenance campaign, which was partially offset by higher volumes at Antamina.

Metallurgical coal production was flat quarter on quarter at 8.8Mt and down 8% for the half to 17.7Mt. Volumes were flat due to double the amount of rainfall recorded in the quarter impacting most operations and planned maintenance in the previous quarter.

Whereas energy coal production tumbled 30% quarter on quarter to 3Mt, limiting its first half production growth to 5% to 7.2Mt. BHP advised that the lower volumes were due to three times the amount of rainfall in this quarter impacting stripping and mine productivity.

BHP’s nickel production was strong and rose 21% quarter and quarter to 21.5kt. However, this was not enough to stop the miner recording a 15% decline in half year nickel production to 39.3kt. The second quarter’s higher volumes were due to planned maintenance across the supply chain in the previous quarter.

Finally, the company’s petroleum operations, which are now classed as discontinued due to the merger with Woodside Petroleum Limited (ASX: WPL), reported a 7% production decline for the quarter to 25.7Mmboe. Half year production was up 5% to 53.2Mmboe. Management advised that the second quarter’s lower volumes were due to reduced seasonal gas demand at Bass Strait. This was partially offset by a Shenzi infill well which was brought online and higher production at North West Shelf.

What about the remainder of FY 2022?

Pleasingly, BHP’s production guidance for FY 2022 remains unchanged for iron ore, energy coal, and nickel. Whereas its copper production is trending towards the low end of its guidance range and metallurgical coal guidance has been reduced due to significant wet weather impacts and COVID-19 related labour constraints.

It is a similar story for its cost guidance. BHP’s full year unit cost guidance for WAIO, Escondida and NSWEC remains unchanged. Whereas unit cost guidance for Queensland Coal has been increased, reflecting lower expected volumes for the full year.

BHP’s Chief Executive Officer, Mike Henry, commented: “Our continuing focus on people and on operational reliability enabled us to achieve near record production in iron ore and to reduce the impacts of adverse weather and COVID-19 related labour constraints in our operations. Cost control remained strong across the business, in the face of a more inflationary environment. Unit cost guidance remains intact bar a change to metallurgical coal which is a function of the lowering of production guidance as a result of significant wet weather and in anticipation of Omicron headwinds in the early part of the second half of the financial year.”

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