BHP pins copper hopes on Escondida projects after strike

Anglo-Australian commodities giant BHP expects a strong rebound in copper production in its next fiscal year, following the completion of two major projects at its flagship Escondida mine in northern Chile following a 44-day strike earlier this year.

"Copper production is expected to rebound strongly in the 2018 financial year with the commissioning of the Escondida Water Supply (EWS) project and ramp-up of the Los Colorados extension project during the September 2017 quarter to enable utilization of Escondida's three concentrators," CEO Andrew Mackenzie said in the FY2017 operational review report.

The 44-day strike at Escondida, which ended on March 24, impacted the mine's copper output for FY17 ending June, which was down 21% to 772,000t.

Escondida's annual output was also impacted by a four-day site-wide suspension of operations following a fatality in October 2016 and severe weather in early June.

Production guidance at Escondida for its FY18 is expected to range between 1.13Mt and 1.23Mt, while guidance for company-wide operations is 1.66-1.79Mt.

BHP said it expects to record US$546mn (US$740mn post-tax) in exceptional items in the second half of its FY17, related to idle capacity and other strike-related costs incurred during the industrial action at Escondida and Chilean withholding tax on a one-off dividend paid while a concessional tax rate was available.

QUARTERLY COPPER PERFORMANCE

BHP produced 387,400t copper in the June quarter, down from 413,200t in the same period of last year. For the 2017 financial year, which runs from July 1 to June 30, copper output was 1.33Mt, down from 1.58Mt in the previous financial year, in line with previous guidance, the company said in a report on Wednesday.

Quarterly output at Escondida (pictured) on a 100% basis was 162,400t of copper in concentrates and 62,800t of copper in cathodes compared to 182,700t and 85,300t, respectively, in the year-ago period. BHP operates the Escondida and has a 57.5% stake in it.

Escondida's gold and silver production in the quarter was down to 33,941oz and 1,23Moz, from 35,894oz and 1.87Moz, respectively.

BHP's other Chilean copper unit, the Pampa Norte division, which includes the Spence and Cerro Colorado mines, reported a 9.9% increase in output of copper in cathodes to 72,300t in the fourth financial quarter. Production for FY17 was up 1.15% to 254,300t.

The Melbourne-based company said production guidance at Pampa Norte for FY18 is expected to be higher than the previous year.

BHP said mineral exploration expenditure during FY17 was US$163mn, of which US$139mn was expensed. Greenfield mineral exploration focused on advancing copper targets in Chile, Peru, Canada, Australia and the US.

The firm noted that it was awarded five exploration concessions in Ecuador last month.

ANTAMINA

The 33.75%-owned Antamina mine in Peru contributed 38,500t of copper in concentrate on an equity basis in fiscal Q4 versus 38,700t the year before. Annual output was 133,800t, down 8.6% but in line with guidance.

BHP expects Antamina to produce 125,000t in FY18, as mining continues through a zinc rich ore zone deposit consistent with the mine plan. Zinc guidance for next year is expected to increase to 100,000t from 88,000t.

Antamina saw its quarterly zinc contribution increase 349% to 29,076t, as silver production rose 8.5% to 1.69Moz and lead output climbed to 1,799t from 645t. Molybdenum was down to 328t from 562t in the same quarter of last year.

IRON ORE

BHP reported quarterly iron ore production of 60.1Mt, up from 55.6Mt in the same three months of FY16. Annual output was up to 231Mt from 227Mt.

Mining and processing operations at its Brazilian pellet JV Samarco remain suspended following the tailings dam collapse in November 2015.

BHP expects a FY18 iron ore guidance of 239-243Mt.

COLOMBIAN COAL

Energy coal production at BHP's 33.3%-owned Cerrejón mine in Colombia was up 6.3% to 2.48Mt on an equity basis in the quarter and up 8.6% to 10.9Mt in FY17.