The BHP (ASX: BHP) share price will be on watch this morning after the big resources business announced its FY20 production numbers.
What is BHP?
BHP Group Ltd is a world-leading resources company, extracting and processing minerals (like iron ore and copper), oil and gas, and has more than 62,000 employees and contractors, primarily in Australia and the Americas. Headquartered in Melbourne, BHP has shares listed on both the ASX and London Stock Exchange (BHP Billiton Plc).
FY20 production numbers
BHP said that it met its full year production guidance for iron ore, metallurgical coal and operated copper and energy coal assets.
However, petroleum production was marginally below guidance with lower than expected gas demand due to the impact of COVID-19 in the June 2020 quarter.
Record production was achieved at Western Australian Iron Ore (WAIO), Caval Ridge and Poitrel despite impacts from wet weather and COVID-19. Total iron ore production was 4% higher in FY20 to 248 Mt. The June 2020 quarter saw production up 11% compared to the March 2020 quarter.
FY20 copper production was up 2% to 1,724 kt, though production is FY21 is expected to be lower due to COVID-19 impacts and petroleum natural field decline.
Total FY20 petroleum production was down 10% to 109 million barrels of oil equivalent (MMboe).
FY20 production of metallurgical coal was down 3% to 41 Mt and energy coal production was down 16% to 23 Mt.
Production costs
BHP said it expects to achieve full year unit cost guidance at WAIO, Queensland Coal and and New South Wales Energy Coal. Petroleum and Escondida unit costs are expected to be slightly better than guidance.
Any COVID-19 impacts on upcoming projects?
BHP said that major projects under development in petroleum and iron ore are tracking to plan. First production from the Spence Growth Option is now expected between December 2020 and March 2021. BHP is assessing the temporary reduction in construction activity at Jansen.
Management comments
BHP CEO Mike Henry said: “Our diversified portfolio and high quality assets, together with our strong balance sheet, make us resilient to the ongoing uncertainty in the markets for our commodities. We expect to continue to generate solid cash flow through the cycle and we remain confident in the outlook for demand for our products over the medium to long term.”
Summary
This is a solid production result which should support another pleasing dividend payment in the FY20 result. However, COVID-19 continues to be a potential problem for economies and markets, however the Chinese recovery is clearly good news for BHP. But I wouldn’t buy BHP shares right now, I’d want for weakness in the iron ore price. I’d rather go for ASX growth shares like the ones I wrote about here.
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