I think the BHP Group Ltd (ASX: BHP) share price is an attractive opportunity right now after its quarterly production update.
Let’s have a look at those numbers to start with for the three months to September 2022.
FY23 Q1 update
The business produced 65mt of iron ore – this was an increase of 3% year on year and 1% compared to the June quarter. BHP pointed to “strong operational performance”, partly offset by planned car dumper maintenance in the quarter.
Copper production was 410.1kt, which was up 9% year over year, but down 11% from the June quarter. This was due to “lower concentrator level grade, lower ore stacked in prior months at Pampa Norte reducing cathode production and lower volumes at Olympic Dam as a result of planned refinery maintenance.”
Metallurgical coal production of 6.7mt was down 1% year on year and down 19% quarter on quarter. Wet weather hurt production, among other things.
Energy coal production dropped by a third to 2.6mt, also due to wet weather and labour shortages.
Nickel production grew by double digit to 20.7kt because of unplanned downtime at the smelter in the prior period.
All of these numbers can be important influencers on the BHP share price because they are what the business can control, it can’t do much to control resource prices.
Management comments
BHP CEO Mike Henry said:
We expect global macro-economic uncertainty in the short term to continue to affect supply chains, energy costs, labour markets and equipment and materials availability. BHP remains well positioned, with a portfolio and balance sheet to withstand external challenges and a strategy positioned to benefit from the global mega-trends of decarbonisation and electrification.
Why I like the BHP share price
BHP shares are down more than 10% since 26 August and it’s down more from earlier in the year.
With a cyclical business, I think it’s an interesting idea to consider when commodity prices are lower, like we’re seeing now with iron ore and copper. However, the coal earnings are currently doing a pleasing job of offsetting some of those lost earnings.
The business continues to work on projects. I’m particularly excited about the future of potash – a greener form of fertiliser, which could grow in demand in the coming decades. BHP is developing a potash project in Canada called Jansen.
I’m not sure when, or if, we’ll see the iron ore price get back above US$150 per tonne this decade. But, with the BHP share price down substantially since the 2022 high, I think it’s an opportunistic time to look at the massive miner. The dividends alone could be a solid return from the business over the next few years.
