Shares in FTSE 100 mining giant BHP (BHP) gained 1% to £21.87 after it reassured the market with its latest production numbers and said it is set to finish its financial year ‘strongly’ after record production at its Western Australia iron ore mine.
Iron ore production rose 4% to 188 metric tonnes in the nine months to the end of March and BHP said it expected annual production to be between 245mt and 255mt, which is at the upper end of its forecasts.
Iron ore makes up the majority of BHP’s earnings at the moment, and its shares continue to trade well above their pre-pandemic level after a strong surge in the price of iron ore since the end of last year.
The commodity’s price has soared as high as $189 per tonne in the last few days, spurred on by a tightening of supply as BHP’s rivals Vale and Rio Tinto (RIO) recently reported disappointing iron ore production figures. For context with regards to earnings, big miners like BHP, Rio Tinto and Vale can produce iron ore at a cost of less than $15 per tonne.
Highlighting its lower costs and higher productivity, BHP chief executive Mike Henry said the firm is ‘well positioned to finish the year strongly and continue delivering the essential products the world needs’.
COPPER GUIDANCE LIFTED
Meanwhile BHP also lifted its annual copper production to a range of 1,535 kt to 1660 kt, from 1,510 to 1,645 kt previously, after stronger than expected performance at its Escondida mine.
The miner also trimmed its annual cost target for producing copper, forecasting unit costs of between $0.95 and $1.10 per pound, down from $1.00-to-$1.25 per pound previously.
Copper is becoming an increasingly in demand commodity as countries around the world transition to renewable energy and electric vehicles become more commonplace, and analysts said BHP’s latest production guidance leaves it well-placed to capitalize on such demand.
Quilter Cheviot equity research analyst Jamie Maddock commented: ‘Indeed, we have already seen this year the price of copper surge on increased demand, and we expect this to be sustained as the economic reopening takes shape.
‘Overall, [BHP’s] operations remain still very much on track with only minor cost revisions and we wouldn’t expect significant changes to earnings estimates.’
