The assets BHP is offloading were the standout in its latest production report, while its cash cow iron ore operations were hit by pandemic-related labour shortages.
The standout performer in BHP’s latest quarterly results was ironically a division the mining giant is offloading, while its flagship cash cow operations have been hit by labour shortages.
The company on Tuesday reported its iron ore operations produced 4 per cent fewer tonnes in the three months to September 30 compared to the same period last year due to planned major maintenance and labour shortages among its mine-to-port rail workforce amid Covid-19 related border restrictions.
Ord Minnett said Pilbara iron ore shipments were a touch softer than it expected, 3 per cent lower than anticipated.
Output of petroleum – a business it is hiving off to Woodside as it exits fossil fuels – was up 3 per cent.
“Petroleum was the standout, beating our forecast by 5 per cent on high demand,” Ord Minnett said.
It comes as energy prices have been hitting multi-year highs due to shortages across the world, mainly due to pandemic-related supply disruptions.
Macquarie Research said BHP’s iron ore production and shipments were both 2 per cent lower than it had forecast, while copper output was also marginally weaker than it expected, describing the overall result as “soft”.
“Importantly, guidance for all key commodities is unchanged,” Macquarie Research said.
Ord Minnett took the same comfort after describing the overall result as “mixed”, the same word used by RBC Capital Markets.
Its analyst Kaan Peker, however, said BHP’s iron ore performance beat RBC’s forecasts by 4 per cent, while the miner’s petroleum operations exceeded the expectations of both RBC and consensus.
Mr Peker added BHP’s unification transition period – its plan to de-list from the London Stock Exchange, leaving it solely Australian-listed – could add uncertainty, and shareholder votes on the matter were not certain to pass.
“But we think this structure is better for shareholders, plus petroleum mergers,” he said.
“Finally, we see portfolio opportunities with coal asset divestment.”
BHP is in the midst of a massive effort to improve its green credentials, getting out of thermal coal used in electricity production, but hanging on to its metallurgical coal assets.
It also just emerged Canadian nickel miner Noront Resources had backed a takeover offer by Andrew “Twiggy” Forrest’s Wyloo Metals, but BHP has a right to match the bid.
“BHP has five business days from receiving notice of the superior proposal,” Noront said in a statement lodged overnight.
As part of its dramatic portfolio repositioning to move more towards “future facing” commodities, BHP is keen to get more nickel, given its use in electric vehicle batteries.
The miner had previously tried to sell its Nickel West division, but is now investing in the valuable asset, earlier this month producing the first nickel sulphate crystals from its nickel sulphate plant in Kwinana, south of Perth, after clinching a supply deal with Elon Musk’s Tesla in July.
Originally published as Labor shortages dent BHP’s iron ore output, Woodside-bound petroleum assets ironically stand out
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