Mining giant BHP is ramping up its copper output as fresh sanctions on the movement of the key energy-transition mineral out of Russia squeeze existing supply.
Copper volumes increased by 10 per cent from BHP’s newly merged South Australia operations, while its mines in Chile improved grades and hit production records in the third quarter, BHP chief executive Mike Henry said in an update on Thursday.
A worker taps into the copper stream at BHP’s Olympic Dam north of Adelaide.Credit: Bloomberg
BHP established a lucrative copper ‘province’ in South Australia when it took over Oz Minerals last year.
“We remain on track to meet copper, iron ore and energy coal production for the year,” Henry said.
Global miners like BHP and Rio Tinto are concentrating their efforts on “future-facing” elements such as copper, which are increasingly sought after to accelerate the globe’s transition to renewable power.
Despite rising demand, copper prices came under pressure in 2020 amid fears of a worldwide downturn, but they have since reached $US4.30 ($6.70) per pound as demand absorbs rising output from the world’s mines and increased refining out of China.
Earlier this week, the London Metal Exchange (LME) said it would ban trading of key Russian metals produced on or after April 13 to comply with the latest sanctions imposed by the US and the UK due to the war in Ukraine.
The US Treasury and British government have barred the Chicago Mercantile Exchange and the LME from taking new production of key metals like aluminium, copper and nickel, a move that will cut funds to Russian mining giants like Rusal and Nornickel.
The supply outlook for copper has been further hammered by impending Chinese regulations, which are expected to cut supply from its smelters by 10 per cent.
“We believe refined supply will come under pressure in the next three to six months as shortages of concentrate bite and ‘traditional’ drivers of copper demand will improve,” UBS analysts led by Daniel Major said in a note to clients last month.
“We believe the market is closer to a fundamental inflection point,” they said.
Henry on Thursday said that BHP was edging closer to making a final call on its nickel business in Western Australia. In February, the mining giant announced a $US3.5 billion ($5.4 billion) pre-tax impairment against its West Australian nickel operations.
BHP’s Western Australia Nickel employs about 2500 people, and any downsizing of its mining operations, smelter in Kalgoorlie and refinery in Kwinana will reverberate across the industry.
“In Western Australia, we expect to announce a decision on the future of our nickel business in the coming months, where efforts to optimise operations and preserve value are under way,” Henry said.
Long considered the rising star of Australia’s battery-driven mining green-energy boom – alongside lithium and rare earths – nickel was swamped by a tsunami of supply from Indonesia last year, which slashed prices.
Iron ore production from BHP’s key Western Australia Iron Ore division, the lowest cost producer globally, was marginally lower because of heavy rainfall in the Pilbara. Total iron ore production for the quarter came in at 190 million tonnes.
“We continue to invest in improvements to our rail and port operations, which are essential for growth in the medium term to 305 million tonnes per annum and beyond,” Henry said.
Rival Rio Tinto reported on Wednesday that its iron ore shipments from the Pilbara fell 2 per cent to 77.9 million tonnes over the same period as it battled weather-related disruption to its ports.
Two tropical cyclones proved challenging to Rio’s metallurgical coal operations in Queensland over the three months to March, impacting production and unit costs.
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