The BHP Group Ltd (ASX: BHP) share price will be on watch on Tuesday after the release of its quarterly update this morning.
How did BHP perform in the third quarter?
During the third quarter BHP's strong underlying operational performance across its portfolio offset the impacts of planned maintenance, natural field decline, and wet weather in Australia.
According to the release, BHP's copper equivalent production was broadly unchanged over the nine months ended March 2020. As a result, volumes for the full year are now expected to be in line with last year.
In addition to this, BHP achieved record production at Western Australia Iron Ore (WAIO) and Caval Ridge. And over in Chile, record average concentrator throughput was delivered at the Escondida project and record ore was stacked at Spence. This means iron ore production is on target in FY 2020, which is a big positive given the high prices it is commanding.
BHP Chief Executive Officer, Mike Henry, was pleased with the quarter.
He said: "We have delivered strong performance across the portfolio despite the impacts of planned maintenance, natural field decline and wet weather in Australia. Western Australia Iron Ore achieved record year-to-date production, while Escondida production also increased supported by record concentrator throughput."
"While demand in China has strengthened in recent weeks, we expect other major economies, including the US, Europe and India, to contract sharply in the June 2020 quarter. The situation remains fluid, however, with our strong financial position and low-cost operations, our business is resilient, with capacity to generate solid cash flow through this period and emerge well placed as the global economy recovers," he concluded.
Production guidance.
BHP has advised that its production guidance for FY 2020 remains unchanged for petroleum, iron ore, and metallurgical coal.
Copper guidance for its operated assets is broadly unchanged and Antamina guidance is under review following temporary suspension of operations due to COVID-19.
Energy coal production guidance is also under review with the Cerrejón operation placed on temporary care and maintenance due to COVID-19.
Positively, full year unit cost guidance remains unchanged for the financial year.
Capital expenditure and developments.
The company's major projects under development in petroleum and iron ore remain on track.
However, as a result of measures put in place to reduce the spread of COVID-19, the Spence Growth Option schedule and timing for completion of the shafts at Jansen are under review.
Outside this, management is reviewing its capital expenditure guidance for FY 2021 and expects it to be lower than the current guidance of around US$8 billion.
Foolish Takeaway.
Overall, I thought this was a strong update by BHP and demonstrates why it is one of the best options in the resources sector.
And had oil prices not crashed lower overnight, I suspect the BHP share price would have climbed higher on this update.
