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BHP capitalising on iron ore highs

Record iron ore production for mining giant alongside strong June copper performance despite Covid-19 flare-ups in Chile
July 21, 2020

BHP (BHP) hit record iron ore production in the June quarter, making hay while the price is around $100 (£79) a tonne (t). 

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The steelmaking ingredient is flying high because of demand from the Chinese Covid-19 recovery, and supply disruptions in South America. BHP’s increased iron ore production - 248mt in the year and 67mt in the June quarter - came at the same time that Western Australia had closed its state borders, meaning major changes in operations for the largely fly-in, fly-out workforce. The diversified miner flagged a $100m-$150m increase in costs this year from Covid-19 control measures, which will eat into profits. 

The copper division maintained production at the same level as 2019, even with production slow-downs in Chile. The Escondida mine also hit a record in the June quarter, with its highest concentrator throughput in a quarter of 382,000t per day. This measures signifies how much ore the mine turns into copper concentrate, a product that goes into copper refineries. 

Despite that improvement, guidance for the world’s biggest copper mine for the 2021 financial year will see production go down by a minimum of 13 per cent from 2020’s 1.19mt because of a decline in grades and lower staffing due to Covid-19. 

BHP produced 1.7mt of copper overall in the 12 months to 30 June, a 2 per cent increase on 2019. 

While China is doing well, BHP said steel production had fallen dramatically elsewhere, with steelmakers running at 50-60 per cent capacity ex-China in the June quarter. This has little impact on iron ore prices but is a worrying economic indicator because of the wide uses of steel. 

Outside of copper and iron ore, the standout for pricing was thermal coal, which was down 27 per cent to $57/t. The company said that the energy material was in a “difficult state”, with two-thirds of seaborne supply losing money at the June quarter price of $56/t.