BHP Group Ltd [ASX:BHP] released an update today on their operations for the December half of the year.
BHP produces commodities like iron ore, coal and copper as well as conducting oil and gas exploration.
Higher iron ore prices on the back of China’s demand
The company said they produced 144.5 million tonnes of iron ore from Western Australia Iron Ore (WAIO) year-to-date, close to a 6% increase from same period last year.
And, similarly with what I wrote yesterday regarding Rio Tinto Ltd [ASX:RIO], BHP has benefitted from higher iron ore prices too. Strong Chinese iron ore demand along with disruptions affecting Brazilian Vale have boosted iron ore prices.
The company got average realised prices of US$103.78 for the December half of the year, 35% more than the June 2020 half of the year.
BHP also said they’ve reduced gross debt by US$4.1 billion during the period.
And reported a 5% decrease in copper and metallurgical coal production compared to the same period last year, along with a 30% decrease in energy coal production.
The company said back in their FY20 report they are looking at divesting their thermal coal mines with so much uncertainty about how the transition to a low carbon economy may play out.
As they mentioned on the FY20 report, ‘coal power is expected to progressively lose competitiveness to unsubsidised renewables on a new build basis in the developed world and in China.’
BHP kept its FY21 guidance for Western Australian mines but increased it for overall iron ore production to between 245–255 Mt from 244–253 Mt, mainly because of Samarco. Samarco is a joint venture with Brazilian Vale but operations have been on hold since 2015 when the Fundão dam collapsed.
Samarco restarted production of iron ore pellets in December 2020 and BHP expects production from Samarco to be between 1–2 Mt for FY21.
The BHP share price was up 1.05% at time of writing, trading at $46.35.
BHP shares have surged by 18% increase for the year, Fortescue Metals Group Ltd [ASX:FMG] 140% and Rio Tinto Ltd [ASX:RIO] 38%. Higher iron ore prices have delivered higher share prices for producers, along with dividends.
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