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Why Did BHP Reduce Its Copper Production Guidance?

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Jan. 27 2017, Updated 9:07 a.m. ET

Copper production

Along with other commodities, copper gained in 2016, especially after Donald Trump’s win. Companies producing copper are still taking steps to increase production to lower costs. These companies include BHP Billiton (BHP) (BBL), Freeport-McMoRan (FCX), Teck Resources (TCK), Southern Copper (SCCO), and Newmont Mining (NEM).

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Copper volumes fell

BHP’s total copper production for the half-year ended December was 7.0% lower YoY (year-over-year), at 712,000 tons. There were several factors that drove production in fiscal 1H17.

  • Escondida’s copper production for fiscal 1H17 was unchanged YoY at 452,000 tons. Higher concentrate production was offset by lower cathode production.
  • The company is expecting the commissioning of the Escondida Water Supply project and ramp-up of the Los Colorados Extension project late in fiscal 2017, which allow the full use of three concentrators in fiscal 2018.
  • Production at Pampa Norte fell 8.0% to 116,000 tons. The unplanned outage offset improved recoveries at Cerro Colorado.
  • Copper production at Olympic Dam fell 30.0% YoY to 78,000 tons. The lower production is mainly due to planned maintenance and a statewide power outage that began on September 28, 2016.

Copper guidance

BHP Billiton (BHP) reduced its fiscal guidance by 2% to 1.6 million tons. The reduction is mainly due to lower production at Olympic Dam, which was impacted by the statewide power outage.

Investors looking for diversified exposure to the materials sector could consider the iShares US Basic Materials ETF (IYM). Almost 12.0% of IYM’s holdings are invested in metal and mining companies. In the next part of this series, we’ll look at BHP Billiton’s petroleum production in fiscal 2Q17.

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