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BHP Group (BHP) Reports 1% Rise in Iron Ore Production in 1H22

BHP Group’s BHP iron ore production improved 1% year over year to 129.4 Mt in the first half of the fiscal year 2022 (ended Dec 31, 2021). Record levels were attained at Western Australia Iron Ore (WAIO), reflecting strong supply chain performance, including higher car dumper performance and improved rail cycle times despite temporary labor constraints relating to COVID-19 border restrictions and the planned major maintenance on car dumper one and the Jimblebar train loadout.

Total copper production declined 12% year over year to 742 kt in the six-month period ended Dec 31, 2021. Metallurgical coal production was down 8% to 17.7 Mt while energy coal production was up 5% to 7.2 Mt. Nickel production declined 15% year over year to 39.3kt during the period under review. Total petroleum production was 53.2 million barrels of oil equivalent (MMboe) for the period under review, up 5% year over year. The petroleum business has been classified as discontinued operations due to the proposed merger of the company’s Petroleum business with Woodside. It is expected to be completed in the June 2022 quarter.

Fiscal 2022 Guidance

BHP affirmed its production guidance for iron ore at 249-259 Mt for fiscal 2022 compared with 253.5 Mt produced in fiscal 2021.

The company anticipates copper production to come near the low end of its guided range of 1,590 kt and 1,760 kt due to lower production guidance at Pampa Norte and narrowed guidance ranges for Escondida and Olympic Dam. Production guidance of Metallurgical coal is at 38-41 Mt compared with the previous 39-44 Mt. The guidance for energy coal production remains unchanged at 13-15 Mt. Nickel production for fiscal 2022 has been retained between 85 kt and 95 kt.

Escondida unit cost is anticipated at $1.20-$1.40 per pound. Queensland Coal unit cost for the fiscal is expected at $85-$94 per ton, up from the prior expectation of $80-$90 per ton, reflecting lower expected volumes for the full year. NSWEC unit costs are predicted between $62 per ton and $70 per ton. The company stated WAIO unit cost guidance is tracking at the lower end of the guidance of $17.50-$18.50 per ton.

Other Key Developments

In November 2021, BHP signed an agreement to divest its 80% interest in BHP Mitsui Coal Pty Ltd (BMC), an operated metallurgical coal joint venture in Queensland. It is expected to be completed in the middle of this year, subject to the satisfaction of certain conditions.

The company added that its plans to unify its corporate structure by merging two parent companies into one are expected to complete by Jan 31, 2022. However, this is subject to shareholder approval of both BHP Group Limited and BHP Group Plc and UK Court sanction of the scheme.

In January 2022, BHP Group concluded the sale of its 33.3% stake in the Cerrejón joint venture in Colombia for $294 million in cash.

In line with its strategy to focus on commodities with strong future prospects (copper, nickel and potash), BHP recently invested in the Kabanga Nickel Project, a high-quality nickel sulphide deposit in Tanzania. BHP has invested $10 million in Lifezone Limited to progress its low-carbon hydrometallurgical processing technology.

As of Dec 31, 2021, the company had two major projects under development — the $2.97 billion Jansen mine shafts project and the $5.7 billion Jansen Stage 1 project.

Price Performance

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BHP’s shares have fallen 8.7% in a year year, compared with the industry’s decline of 3.9%.

Zacks Rank & Key Picks

BHP currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks worth considering in the basic materials space include Commercial Metals Company CMC, Albemarle Corporation ALB and AdvanSix Inc. ASIX, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Commercial Metals has a projected earnings growth rate of 10.5% for the current fiscal year. The Zacks Consensus Estimate for CMC's current fiscal year earnings has been revised upward by 6.6% over the past 60 days.

Commercial Metals beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters and missed once, the average surprise being roughly 7.4%. CMC has rallied around 72% in a year.

Albemarle has an expected earnings growth rate of 51.3% for the current year. ALB's consensus estimate for the current year has been revised upward by 5.4% over the past 60 days.

Albemarle beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 22.1%. ALB shares have appreciated around 26% over the past year.

AdvanSix has an expected earnings growth rate of 3.9% for the current year. The Zacks Consensus Estimate for ASIX’s current-year earnings has been revised upward by 2% in the past 60 days.

AdvanSix beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 46.9%. ASIX has rallied around 97% in a year.

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