The BHP Group Ltd (ASX: BHP) share price will be on watch on Wednesday after the mining giant released a reasonably mixed third quarter update this morning.
Here's how BHP performed during the quarter:
Petroleum production was down 5% on the prior corresponding period to 29 MMboe. Management advised that lower seasonal gas sales at Bass Strait were partially offset by higher Trinidad and Tobago volumes following maintenance in the previous quarter. Year to date petroleum production stands at 92 MMboe, which is flat on the same period last year.
Copper production increased 1% on the prior corresponding period to 420kt. This was driven by increased production from Olympic Dam after surface operations returned to full capacity following acid plant outage in August 2018. Lower copper grades at Escondida offset some of Olympic Dam's improvements. Copper production is down 3% year to date to 1,245kt.
Iron ore production was down 3% during the quarter to 56Mt after Western Australia Iron Ore (WAIO) volumes were impacted by Tropical Cyclone Veronica. Iron ore production is flat year to date at 175Mt.
Metallurgical coal production fell 4% to 10Mt during the quarter after wet weather offset a solid underlying operating performance at Queensland Coal. Year to date production is flat at 31Mt.
Energy coal production rose 1% during the quarter to 7Mt thanks to increased production at New South Wales Energy Coal (NSWEC). Though, some of this was offset by the impact of adverse weather at Cerrejón. Energy coal production is flat year to date at 20Mt.
BHP chief executive officer, Andrew Mackenzie, was pleased with the company's performance despite the challenging conditions.
He said: "During the March 2019 quarter, we had a strong operational performance despite weather impacts across Australia and Chile. We approved Atlantis Phase 3 and now have five major projects under development. Those projects, our work on transformation, technology and culture, and our successful petroleum and copper exploration and appraisal programs will grow value and returns for years to come."
Outlook.
Management held firm with its production guidance for the 2019 financial year for petroleum, copper, metallurgical coal, and energy coal. However, iron ore production guidance has been trimmed to between 265Mt and 270Mt due to the impact of Tropical Cyclone Veronica.
In addition to this, full year unit costs for Petroleum, Escondida and Queensland Coal are expected to be in line with guidance. Unit costs for Western Australia Iron Ore are now expected to be below US$15 per tonne, due to the impact of Tropical Cyclone Veronica. Whereas, unit costs for New South Wales Energy Coal are now expected to be approximately US$51 per tonne, following changes to the mine plan.
Should you invest?
Although its shares have been on a tear this year along with Fortescue Metals Group Limited (ASX: FMG) and Rio Tinto Limited (ASX: RIO), I don't believe it is too late to invest. Especially if you're an income investor in search of exposure to the resources sector.
This is because thanks to its strong balance sheet and the high levels of free cash flow it is generating, I believe there's a good chance BHP will undertake further capital management initiatives over the next couple of years. This could be in the form of share buybacks or more special dividends.
