BHP Group Ltd (ASX: BHP) has announced its operational update for the FY21 half year. Is the BHP share price worth looking at?
BHP’s update
The resource giant said that it achieved another strong operational performance during the half, with measures to counter the risk of COVID-19 remaining in place.
There was record production at Western Australia Iron Ore (WAIO) and record average concentrator throughput was delivered at Escondida. Compared to the prior corresponding period, iron ore production was up 6% to 128.4 mt.
BHP’s copper production was broadly flat in the December 2020 half year according to the company, but it was actually down 4% against the prior corresponding period. Management said that the strong underlying operational performance offset the impacts of planned maintenance, natural field decline, copper grade decline and adverse weather.
Petroleum production was down 12% to 50.5 million barrels of oil equivalent (MMboe). Metallurgical coal production was down 5% to 19.2 mt and energy coal production was down 30% to 8.2 mt.
BHP said it expects to recognise an impairment charge of between US$1.15 billion to US$1.25 billion after tax in relation to its NSW Energy Coal (NSWEC) division and associated deferred tax assets, resulting in net operating assets of between US$250 million and US$350 million. BHP says that this reflects current market conditions for Australian thermal coal, the strengthening Australian dollar, changes to the mine plan and an updated assessment of the likelihood of recovering tax losses.
Production guidance
Production guidance for FY21 remains unchanged for petroleum and metallurgical coal.
Iron ore guidance has increased to between 245 mt to 255 mt as a result of a restart of Samarco in December.
Copper guidance has been narrowed to be between 1,510 kt to 1,645 kt. This reflects the strong performance at Escondida, according to BHP.
Energy coal guidance has been reduced to between 21 mt and 23 mt following a 91-day strike at Cerrejon.
Full year unit cost guidance remains unchanged for the 2021 financial year.
Summary thoughts
BHP is a quality businesses as resource companies go. Its diversified strategy means that it should never go too far wrong. Oil probably has a good short term outlook, but iron ore isn’t likely to get any stronger so I don’t think now is the right time to buy BHP shares.
There are other large ASX dividend shares I’d rather buy such as Magellan Financial Group Ltd (ASX: MFG) or APA Group (ASX: APA).
