Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
BHP delivers solid production update, dividends next
The BHP Group Ltd (ASX: BHP) share price is on watch after the mining giant released its HY22 production numbers.
BHP is currently producing a number of different resources including copper, iron ore, coal and petroleum. It also has plans for potash in the future.
BHP’s HY22 production
The huge resources business said that its Western Australian Iron Ore (WAIO) business achieved near-record production.
Total iron ore production was up 1% in HY22 to 129.4 million tonnes (mt). For the December 2021 quarter, production was up 6%.
BHP said that its copper production for HY22 was down 12% to 742,000 tonnes. For the December 2021 quarter, copper production fell 15%.
Half-year nickel production was down 15% to 39,000 tonnes, while December quarterly production was down 10%.
Metallurgical coal production was down 8% for the half-year to 17.7 million tonne, with quarterly production down 7%.
HY22 NSWEC energy coal production was up 5% to 7.2 million tonnes. Cerrejon half-year production jumped more than 100% to 4.2 million tonnes.
How is the miner performing?
The copper division saw lower production volume at Olympic Dam due to the planned smelter maintenance campaign, completed in January 2022.
WAIO achieved another strong performance, reflecting strong supply chain performance, increased ore car availability and the continued ramp-up of South Flank, Australia’s largest new iron ore mine in more than 50 years. This was partially offset by the impact of temporary rail labour shortages due to COVID border restrictions. Iron ore is a key contributor to profit and the BHP share price.
Volumes of coal used for steel-making suffered from the large amount of rainfall. Energy coal also suffered from rainfall.
The business is making progress on the review of its lower-grade coal assets. The divestment of Cerrejon to Glencore completed in January 2022.
Its potash projects under development are tracking to plan. The Jansen shaft project in Saskatchewan, Canada, is 98% complete and the Jansen Stage 1 project has commenced contract awards.
Guidance
Production guidance for FY22 was unchanged for iron ore, energy coal and nickel.
However, full-year total copper production was trending towards the low end of the guidance range, reflecting lower production guidance for Pampa Norte.
Metallurgical coal guidance has been reduced as a result of significant wet weather impacts and COVID-related labour constraints.
Other activity
A shareholder vote on the unification of domicile under its Australian parent company will be held on 20 January 2022, with unification planned to be completed by 31 January 2022.
Completion of the proposed merger of the petroleum business with Woodside Petroleum Limited (ASX: WPL) business is expected in the June 2022 quarter.
My thoughts on the BHP share price
It’s good to see the progress that BHP is making towards becoming focused on greener, longer-term resources, partly by divesting its petroleum and coal businesses. Nickel, copper, iron and potash is a good group of commodities.
BHP continues to produce high levels of iron, which should be making good profits for the miner. The BHP share price has jumped more than 20% over the last couple of months. It’s less of an opportunity now, but the business could still be a decent pick as one of the big ASX dividend shares with a big yield. But sometimes commodity prices can seriously sink.
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