BHP eyes copper growth from Spence project

UK-Australian resources firm BHP expects the Spence Growth Option project at its Spence mine in Chile to support around 300,000 t/yr of copper output in its first four years, including current leaching operations.

First output from the project is now expected in December 2020 to March 2021, later than July-December this year as originally scheduled because of the impact of Covid-19 on the workforce. The project's $2.46bn budget is unaffected.

The Spence Growth Option will be ramped up over 12 months to incrementally add 185,000 t/yr of copper output over 10 years and extend mine life by around 50 years. The Spence and Cerro Colorado mines make up BHP's wholly-owned Pampa Norte copper mining operation in northern Chile, which produced 243,000t in 2019-20 and is targeting 243,000-270,000t in 2020-21.

Copper accounted for 19pc of BHP's underlying earnings before interest, tax, depreciation and amortisation (ebitda) in the July 2019 to June 2020 financial year, unchanged from a year earlier, BHP said today. Its total ebitda from copper operations in Chile, Peru and Australia fell by $300mn to $4.3bn, despite output rising to 1.72mn t from 1.68mn t, as the average copper price received fell by 5pc to $2.50/lb.

BHP expects its overall ebitda in 2020-21 to be impacted by $32mn for every $0.01/lb change in copper prices, compared with $233mn for every $1/t change in iron ore, its major earner.

The company's Escondida mine in Chile is still expected to average copper output of 1.2mn t/yr over the next five years, despite a fall in 2020-21, continuing to underpin overall group production.

Surplus stockpiles at Olympic Dam, Australia's largest copper mine, will be drawn down in 2020-21 following significant mine development, as part of a focus on sustainably increasing production and returns. Major smelter maintenance is scheduled for the first half of 2021-22.

BHP said it is transitioning to new mines at its nickel operations in Western Australia as it focuses on higher-margin products. Nickel ore reserves have risen by 90pc from 2017 to around 1.7mn t as it gears up to feed a downstream nickel sulphate refinery and meet growing demand from the lithium-ion battery sector. Nickel output is expected to be 85,000-95,000t in 2020-21, up from 80,100t in 2019-20.

By Angus Macmillan