BHP boss Mike Henry says first South Flank production expected imminent
BHP is set to deliver the first ore from its new South Flank mine, as CEO Mike Henry says key commodities are being supported by government spending plans around the world.
BHP is set to deliver the first ore from its $US3.6bn South Flank mine in the Pilbara within days, according to chief executive Mike Henry, as iron ore prices jump back up after sharp falls last week despite fresh warnings from Chinese authorities that trade tensions could impact iron ore.
Mr Henry told the Bank of America global metals, mining and steel conference on Tuesday BHP was set to announce the first production from the 80 million tonne a year mine, with the mine’s first output “perfectly timed” amid surging iron ore prices.
Mr Henry also flagged a bright outlook for the miner’s portfolio, noting that global government-backed stimulus packages designed to help national economies recover from the pandemic will underpin demand for the company’s core commodities.
“Government stimulus and pro-growth agendas, which are expected to remain in place for an extended period, are anticipated to lead to robust growth, a lift in inflation and solid demand for mineral resources and oil and gas,” he said, but was not specific on a price outlook.
“Around 60 per cent of our production is in commodities that support steelmaking, which we anticipate will see strong demand as the world decarbonises.
“Around one quarter of our portfolio is currently in ‘future facing commodities’, which for us are copper, nickel and potash, and we expect to grow this over the coming years. This includes an increase in average copper production over the next five years of more than 300 thousand tonnes per annum, equivalent to adding another Spence to the portfolio.”
Iron ore futures jumped back up on Tuesday after sharp falls last week, trading up on news of strong steel mill margins and record crude steel output in China in April.
The most active contract traded on China’s Dalian exchange was up 4.5 per cent to $US193.36 on Tuesday evening, with futures on the Singapore exchange up 3.2 per cent at $US214.15.
Spot prices were up 4 per cent to $US218 a tonne on Monday, according to S&P Platts data, after tumbling from record highs of above $US235 a tonne earlier in the week after Chinese authorities again threatened intervention in the market to stabilise iron ore and steel prices in the domestic market.
But despite the positive start to the week, Chinese authorities are still signalling that iron ore could get caught up in ongoing tensions between Beijing and Canberra, with China’s powerful National Development and Reform Commission warning at its monthly briefing the country would pursue alternative sources for iron ore.
According to Bloomberg reports, the NDRC’s monthly briefing on Tuesday included a call for Chinese companies to boost domestic iron ore exploration, widen their import sources for the commodity, and explore overseas ore resources.
While the call is seen as unlikely to impact Pilbara exports in the near term, given the dearth of alternatives to Australian miners – which supply about two thirds of China’s total imports of the steelmaking ingredient – it is another signal that China may back development of new iron ore options as a medium term alternative.
Copper prices are still trading above $US10,000 a tonne – but also off highs nearing $US10,750 a tonne a few days ago – fuelling ongoing talk the mining sector is entering a new price supercycle, and Mr Henry told the BofA conference BHP had delivered key expansion and extension projects on time, on budget and with perfect timing to take advantage of current pricing.
“We have delivered a number of major projects in the past twelve months – the 185 thousand tonne per annum expansion at the Spence copper asset, Atlantis Phase 3 and the Ruby project in petroleum, and in the next few days we will announce first production at the 80 million tonne per annum South Flank iron ore project, with its higher grade and lump fraction,” he said.
“All brought in on time and on budget in spite of COVID-19, and perfectly timed given where copper and iron ore prices are at.”
South Flank will replace production from BHP’s 80-million-tonne-per-annum Yandi mine, but contains ore with higher grades and better portion of more valuable lump ore than its predecessor, which BHP has said will improve the overall quality of its Pilbara production and cash returns from its operations.
BHP shares closed Tuesday up 92c, or 1.8 per cent, to $50.52.
