How is the biggest ASX copper producer fairing amidst red metal bull run?

  • February 23, 2021 05:49 PM AEDT
  • Team Kalkine
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How is the biggest ASX copper producer fairing amidst red metal bull run?

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Summary

  • BHP is among the top five copper producers in the world.
  • The Company produced 428kt of copper during the December 2020 quarter and has provided a production guidance range of 1,510-1,645kt for FY21.
  • Copper is trading at its new nine-year high.

On 23 February 2021, the copper crossed US$ 9,280 per tonne at the London Metal Exchange (LME), marking a 9-year high. The growth in copper price has been astonishing and remarkable in the last 9-10 months.

From four-year low price of USD 4,617 on 20 March 2020 to the current price level, it has appreciated 100%. The growth in industrial output and supply shortages from Chile and Peru is fueling the price rise of the commodity.

Copper Bull Run (Image Source: Copyright © 2021 Kalkine Media Pty Ltd.)

Related Read: Why is Copper at a New Seven-Year High?

The ASX listed, global mining behemoth BHP Group (ASX:BHP) ranks among the top five largest producers of copper worldwide. The Company operates the world’s largest copper project- Escondida in Chile. It is to be noted that, Chile is the world’s biggest producer of the red metal.

BHP group produced 428.1kt of copper during the December 2020 quarter. Most of the copper production of the group comes from four copper projects – Escondida, Pampa Norte, Olympic Dam and Antamina. More than 65% of production alone comes from the Escondida Project.

BHP holds 57.5% interest in the world’s largest copper producer project. Two pits on the project produce feed for three concentrator plants and two leaching units. The project is located in the Atacama Desert in Northern Chile.

Production 

For most of 2020, production from the Escondida project suffered low output than the capacity due to the restrictions of COVID-19 imposed by the Chilean Government. The situation is expected to remain challenging for the entire March 2021 quarter.

BHP has provided production guidance from the project in a range of 970-1030kt for FY21. The copper production during the year 2022 is expected to suffer due to the reduced movement of feed material in 2021.

The Pampa Norte project recorded a dip in production by 27%, mainly due to the scheduled maintenance on the project. The Company has provided production guidance for FY21 in a range of 240-270kt.

Olympic Dam project recorded a 16% increase in production during 1H of FY21. The underground mining and smelter performance improved and delivered better results. Work is going in full throttle to replace and commission a refinery crane by the end of March 2021. Production guidance for the Olympic Dam project is provided in the range of 180-205kt for FY21.

BHP has planned a major maintenance job on the smelter in 2022. Production will get impacted for the period of the maintenance.

Copper production from the Antamina project was down marginally by 1%, which was compensated by the increase in Zinc production by 78%. The feed coming from the mines had a lower copper head and an increased zinc head. Guidance for the copper production is kept in the range of 120-140kt for the FY21.

Major Copper Project in Pipeline

The Spence Growth Option achieved its first commercial production in December 2020. The project is located in Chile and fully owned by BHP Group.  The Company had to shell out US$2.46 billion to bring the project online.

The Spence Growth Option would also produce molybdenum. The project is expected to run full swing within the next 12 months.

Copper bull run is expected to continue in 2022 also, and many market participants are expecting the price to cross US$10,000 per tonne. The BHP Group is all set to ride the bull and take maximum leverage of the market.

The action around copper prices has also attracted attention of many players, BHP’s peer Rio Tinto (ASX RIO) recently inked a deal for a copper project.

BHP’s peer RIO joins hands with another global mining giant for a copper project

Copyright © 2021 Kalkine Media Pty Ltd.

The Resolution Copper Project in the U.S.A has been in the news lately. Before leaving the Oval Office, former President Donald Trump gave approval for a land swap for the Resolution Copper Project.  Aboriginal people are protesting against the project, which is jointly owned by two mining behemoths-BHP Group and Rio Tinto (ASX:RIO).

More on the Project: Trump admin greenlights Land Swap for Resolution Copper Project

Rio has 55% interest and is the operator of the project. The JV partners published the Final Environmental Impact Study (FEIS) on 15 January 2021. The native people are protesting against the potential destruction of their sacred sites around the project.

Production and mining activities will require more approval and consent of the aboriginal population and is years away.

Share Price: On 23 February 2021, BHP closed the day’s trade at A$50.43 with a gain of 3%. The Company has a market cap of A$144 billion as of 23 February 2021. In the past 3 months alone, BHP has appreciated by 28%, rewarding its shareholders handsomely.

 

 


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