Weather Outage and Samarco Settlement Pose Challenges Despite BHP’s Strong Half-Year

Operational Highlights and Production Growth

BHP's half-year operational review for the period ending 31 December 2024 reveals a strong underlying performance across its core commodities, with copper production increasing by 10% to 987 kilotonnes. This growth was predominantly driven by Escondida, which achieved a 10-year production record with a 22% increase, benefiting from higher concentrator feed grades and improved recoveries as mining progressed into richer ore zones.

Iron ore production at Western Australia Iron Ore (WAIO) also saw a 1% increase to 131 million tonnes, supported by record half-year shipments through the port. This was enabled by the completion of the Port Debottlenecking Project (PDP1), which enhanced throughput capacity and supply chain efficiency. Steelmaking coal production from BHP Mitsubishi Alliance (BMA) operations rose 14%, reflecting improved strip ratios and truck productivity despite operational challenges such as longwall moves and maintenance activities.

Challenges and Adjusted Guidance

While most assets performed strongly, Copper South Australia experienced a weather-related power outage in early Q2, leading to a temporary production disruption at Olympic Dam. Although the operation quickly ramped back up, BHP has revised down its FY25 production guidance for this asset to between 300 and 325 kilotonnes. Unit costs at Copper SA and BMA are expected to be higher than initially guided, primarily due to this outage and planned maintenance activities.

Western Australia Nickel operations entered a period of temporary suspension in December 2024, with production drawing down inventory as the transition occurred. Elevated costs are anticipated during this phase, but BHP has redeployed over 800 employees to other parts of the business and plans to review the suspension decision by February 2027.

Strategic Growth and Sustainability Initiatives

BHP is advancing its growth pipeline with a clear focus on future-facing commodities. In January 2025, the company completed the formation of Vicuña Corp., a 50/50 joint venture with Lundin Mining, to develop the Filo del Sol and Josemaria copper projects in Argentina. This transaction, involving a US$2 billion cash payment, positions BHP to capitalize on one of the most significant copper discoveries globally in recent decades.

In Canada, the Jansen Stage 1 potash project is 63% complete, with first production targeted for late 2026. Stage 2 development is progressing in parallel, underscoring BHP's commitment to diversifying its commodity base.

On the sustainability front, BHP received strong shareholder support for its second Climate Transition Action Plan, with a 92% vote in favor at the 2024 AGM. The company is actively decarbonizing its operations, exemplified by the commissioning of the Port Hedland solar and battery project to supply renewable power to WAIO's port facilities and plans to develop Australia's largest ironmaking electric smelting furnace pilot plant.

Legal and Social Commitments

BHP, alongside Samarco and Vale, finalized a comprehensive settlement agreement with Brazilian authorities concerning the Samarco Fundão dam failure. This agreement, ratified by Brazil's Supreme Court, reflects BHP Brasil's ongoing commitment to supporting affected communities and environmental restoration. The financial impact of this settlement is significant, with cash payments expected over several years and a US$637 million impact recorded in the first half of FY25.

Outlook and Financial Position

Looking ahead, BHP expects to deliver production in the upper half of its FY25 guidance ranges for WAIO, BMA, NSW Energy Coal, and Samarco, maintaining tight cost discipline across its portfolio. Despite the financial obligations related to the Samarco settlement and the Vicuña transaction, the company's net debt is projected to remain within its target range, reflecting a balanced approach to growth and financial management.

Chief Executive Officer Mike Henry emphasized the company's strong momentum and clear growth pathways, positioning BHP well for the remainder of FY25 and beyond.