![]() ![]() We do not have much to add apart from the fact that China's reopening could support copper prices and that a recovery of BHP's Spence mine might add value. Similar to iron ore, we anticipate unit costs to decrease for systemic reasons.Įscondido is struggling with throughput due to lower grades and concentrator feeds. As such, BHP Group's copper throughput suffered for the same reasons as its iron ore operations during 2022. ![]() CopperĬopper's supply and demand profile is much the same as iron ore due to its industrial application and cumbersome mining process. Only the firm's updated geophysical report can tell us how broad-based throughput will end up, which we, unfortunately, do not have direct access to however, in our opinion, it cannot go much worse for BHP than it did last year. are all seen as factors that could rejuvenate base metals in the coming quarters.Īn important idiosyncratic feature to highlight is that BHP's South-Flank ramp-up is commencing as planned, with the potential to add significant value in the coming year. However, as most know by now, China's reopening, an abated recession in the EU, and higher-than-expected GDP growth in the U.S. And as mentioned before, the general trajectory of both is downward sloping.īHP undoubtedly suffered from lower ore prices in 2022. Nevertheless, costs could taper in 2023, as diesel prices and higher-than-normal wage increases were the culprits for higher general costs. However, the company's historically wide profit margins imply that its input costs are more vulnerable than its top line.ĭuring its latest half-year, BHP's Western Australia Iron Ore suffered from higher-than-expected unit costs. Of course, this could also be disadvantageous to BHP Group, as its materials might sell for lower prices. A uniform observation implies that input costs are tapering as fuel prices, labor disputes, and general material costs are decreasing. ![]() The company's iron ore division suffered from two critical headwinds in 2022, namely high input costs and lower grades. Let us move along to BHP Group's Iron Ore activities. The company currently generates approximately 20% of its revenue from coal, which we believe to be a slight risk however, as mentioned before, an operational recovery might be priced by the stock market. However, BHP's operational recovery could offset some of its coal segment's price pressure. In addition, New South Wales Energy Coal suffered from lower production, also induced by rainfall.Īs our Thungela ( OTCPK:TNGRF ) article mentioned, we are bearish on coal assets, as coal prices are on a severe downward trajectory. To add more color, the prior had maintenance and operational delays, which were both rainfall-induced, and BHP has since upgraded its outlook for the asset. CoalĪn inward look shows that BHP's coal operations were significantly influenced by rainfall in 2022, with the BHP Mitsubishi Alliance project and New South Wales Energy Coal suffering as a consequence. More importantly, it is forecasted that Australia could soon shift from three years of above-average rainfall to one of the hottest and driest years in decades during 2023. Rainfall has tapered in Australia, especially towards the West, where many of BHP's operations are situated. However, there seems to be a critical inflection point. Let us get stuck into the details of BHP's recent operations.īHP Group's 28% year-over-year drop in EBITDA was primarily caused by bad weather, softening commodity prices, and resilient input costs. Readers can find a summation on Seeking Alpha, linked above. ![]() I wanted to skip coverage of BHP's headline earnings, as it is already widely distributed. Moreover, prevalent risks are currently embedded in the mining stock sphere, which could act as a help-in-hand to investors seeking value gaps.ĭespite its soft H1 earnings report, we remain bullish on BHP Group here is why. In our opinion, BHP Group's latest earnings report provides an ideal information asymmetry opportunity, as many market participants might be looking at matters in arrears instead of understanding the company's trajectory. However, as we all know by now, we need to leverage information asymmetry to gain an edge in the financial markets. Nevertheless, an earnings decline remains a critical risk that many investors might be unwilling to tolerate. BHP Group Limited 's ( BHP ) fiscal 2023 first half financial results are out, and the question beckons: will there be an investor exodus after the firm's disappointing half-year earnings report?Īlthough not encouraging, BHP Group's H1 financial results were not surprising, as much of the half-year events were incrementally revealed by the company. ![]()
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