Iron ore price surge at risk, as BHP counts costs of Cyclone Veronica
The prospects of an iron ore shortfall may have eased with Vale reopening a mine, as BHP counted the cost of a cyclone.
The prospects of a long-term shortfall in the iron ore market are easing after Brazil’s Vale won permission to re-open a major mine, as BHP Group today began putting a price on the impact of Cyclone Veronica.
Cyclone Veronica will have cost the Pilbara’s big miners hundreds of millions of dollars by the end of the financial year, as BHP Group confirmed this morning the setback caused by the devastating cyclone will push its annual operating costs up by at least $US1 a tonne.
But the recent sharp surge in the iron ore price, which also lifted the market value of the Pilbara’s major miners, may be set to end.
Fears of a shortfall in the market eased after Brazil’s Vale was given the OK to resume operations at its Brucutu mine, shut since February at the request of Brazilian prosecutors following the company’s latest tailings dam disaster.
Vale said last night it hopes to have Brucutu, its largest mine in the Brazilian state of Minas Gerais, open within 72 hours, although the company said heavy rains and flooding would limit shipments to the mid-range of earlier guidance, at between 307 and 322 million tonnes, in 2019.
Earlier, BHP did not join Rio Tinto in issuing a further production downgrade when the company issued its March quarter production report, but said the impacts of the cyclone would push its unit costs up to about $US15 a tonne, up from previous guidance of below $US14 a tonne.
BHP expects this year to produce 265 and 270 million tonnes of iron ore from its Pilbara operations, down six to eight million tonnes from previous guidance.
The impact is due to “lower volumes, direct costs of remediation, increased demurrage, rehandle to manage stockyards and opportune maintenance at the mines during port downtime” BHP said.
The company shipped 64 million tonnes of iron ore from the Pilbara in the March quarter, slightly ahead of analyst expectations.
BHP’s Queensland coal operations were also hit by bad weather, as massive flooding affected the state early this year, but production from its metallurgical coal division was down only slightly from the same period last year, BHP said, with a “solid underlying operating performance” partially offsetting weather impacts.
Its Queensland coal mines produced 17 million tonnes for the period, down 1 per cent on the first quarter of 2018. BHP’s NSW thermal coal mines produced five million tonnes of product, up slightly.
Copper output for the quarter softened, due to lower grades from its Escondida mine, down 3 per cent to 420,000 tonne and BHP is now saying its expects annual copper production to be at the lower end of its 1.65 to 1.75 million tonne guidance.
BHP shares opened down this morning, trading at $38.54 in early exchanges after closing last night at $39.37.
