BHP Group Ltd on Thursday cut annual guidance for copper production as well as nickel output, as the miner grapples with Covid-19-related labour market woes.

Its outlook for iron ore, metallurgical coal and energy coal for the year ending June 30 were unchanged, however.

In the third quarter ended March 31, copper production fell 6% annually to just under 370,000 tonnes. Quarter-on-quarter it rose 1%.

For the year, however, BHP now expects total copper output between 1.57 million and 1.62 million tonnes, lowered from the previous guidance range of 1.59 tonnes and 1.76 million tonnes.

This means that at worst it expects copper output to fall 2.8% from 1.64 million tonnes in financial 2021.

BHP said the outlook cut is down to lower guidance from the Escondida copper mine in Chile. BHP owns just under a 58% stake in the mine, with peer Rio Tinto PLC holding 30% and Japan-based Jeco Corp just shy of 13%.

Escondida’s output has been hurt by Covid-19-related labour issues and public road blockades as a result of civil unrest.

Third-quarter nickel production fell 8% yearly to 18,700 tonnes. It now expects annual production between 80,000 and 85,000 tonnes, lowered from 85,000 and 95,000 tonnes. BHP put the guidance cut down to ‘Covid-19 related labour constraints’.

Across other commodities, iron ore output rose 1% annually in the third quarter, with yearly guidance maintained at 249 million to 259 million tonnes. Iron ore production was down 10% quarter-on-quarter, however.

Metallurgical coal production rose 10% annually and 20% quarterly, while energy coal output fell 14% year-on-year and 13% quarter-on-quarter.

Metallurgical coal output guidance was maintained at the 38 million to 41 million tonnes range. The energy coal production outlook was kept at 13 million to 15 million tonnes.

BHP left cost guidance for its Western Australia Iron Ore, Escondida and Queensland Coal assets unchanged. For New South Wales Energy Coal, it has been lifted to between $76 and $81 per tonne. BHP is targetting an increase in output of ‘higher quality coal’ as thermal coal selling prices surge.

Chief Executive Officer Mike Henry said: ‘BHP delivered safe and reliable production in the third quarter.

‘Market volatility and inflationary pressures have increased further as a result of the Russian invasion of Ukraine. We continue our work to mitigate cost pressures through a sharp focus on operational reliability and cost discipline. While we expect conditions to improve during the course of the 2023 calendar year, we anticipate the skills shortages and overall labour market tightness in Australia and Chile to continue in the period ahead.’

By the end of its financial year, BHP will be a slightly different proposition.

Earlier in April, it said the merger of its oil and gas business with Woodside Petroleum Ltd was on track for completion on June 1.

Upon completion of the merger that will create one of the 10 largest independent energy producers in the world, 52% of the new company will be held by Woodside shareholders and 48% by BHP shareholders.

On May 3, the sale of its 80% interest in the metallurgical coal joint venture BHP Mitsui Coal, to Brisbane, Australia-based coal miner Stanmore Resources Ltd will be sealed. The $1.35 billion deal was announced back in November.

BHP shares were 2.7% lower at A$50.88 each in Sydney in late trade on Thursday.

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