Strong production numbers
While its iron ore production was better than expected, copper production missed market expectations. Its iron ore production was a semi-annual record. BHP maintained production guidance for all its commodities except copper. It reduced its copper guidance by 2% due to lower production at Olympic Dam.
BHP is expected to see gains of $150 million–$200 million related to asset divestments in 1H17. The company is also expected to record an exceptional item of $164 million related to the subsequent reimbursement received from the cancellation of the Caroona exploration license.
In a press release, the company stated that “we are not yet in a position to provide an update to the ongoing potential financial impacts on BHP Billiton Brasil of the Samarco dam failure. Any financial impacts will continue to be classified as an exceptional item.”
Rio Tinto (RIO) reported its production numbers on January 16, 2017, and also maintained its iron ore production guidance for 2017. Cliffs Natural Resources (CLF) will announce its results for the year ended December 2016 on February 9. Freeport-McMoRan (FCX), the world’s second-largest copper mining company, is expected to release its 4Q16 earnings on January 25. Teck Resources’ (TCK) 4Q16 financial results are scheduled for February 15.
For diversified exposure to the materials sector, investors can consider the Materials Select Sector SPDR ETF (XLB). Metal producers form ~9% of XLB’s portfolio. Continue to the subsequent parts of this series, where we’ll discuss BHP’s fiscal 1H17 production numbers for various commodities in greater detail and evaluate its outlook on the business.