BHP reports positive year despite productivity hit

BHP has overcome productivity issues faced in the 2019 financial year including a costly derailment with the release of a solid final quarter report.

BHP reported a $US1 billion ($1.42 billion) hit to productivity in the 2019 financial year, led by $US835 million of impacts from unplanned production outages in the December 2018 half year, in addition to higher-than-expected costs at several of its mining operations in the June 2019 half year.

The $US835 million figure included the blowouts caused by the company’s forced derailment of a runaway freight train in the Pilbara region of Western Australia in November 2018.

The train, whcih consisted of 268 wagons carrying 30,000 tonnes of iron ore, travelled 92 kilometres in 50 minutes before being derailed at Turner’s Siding, 120 kilometres south of its destination at Port Hedland. 

This led to a five-day suspension of rail operations and contributed to a roughly $US600 million negative impact in the first half when combined with production outages at the company’s Olympic Dam, Spence and WA Iron Ore projects.

The $US1 billion productivity loss did not include the impacts of Tropical Cyclone Veronica on BHP’s Western Australian Iron Ore operations, which affected BHP’s rail and port operations at Port Hedland in March 2019.

Despite these issues, BHP exceeded full year production guidance for petroleum and met its revised guidance for copper and iron ore, posting an 11 per cent increase in quarterly production across its entire portfolio.

BHP chief executive officer Andrew Mackenzie said that the company was positioned to deliver higher volumes in the 2020 financial year.

“Our overall production was broadly in line with last year, overcoming the impacts of weather, grade and natural field decline, and unplanned outages in the first half,” Mackenzie said.

“Our exploration program delivered encouraging results, with seven out of nine petroleum wells successful and further evaluation of the Oak Dam copper prospect underway.”