Friday 20th Apr, 2018

BHP to write-off $300m in Chilean conveyors

Escondida copper mine. Photo: Rio Tinto
Escondida copper mine. Photo: Rio Tinto

A major expansion at BHP’s Escondida copper mine in Chile has made redundant roughly $300 million in conveyor equipment, value the miner will write-down in its FY18 finances as a result.

BHP owns 57.5% of Escondida and operates the mine, while a further 30% is owned by Rio Tinto.

BHP explained in its quarterly report the mine ramped up its new Los Colorados Extension in the December quarter of 2017, resulting in a 34% growth in copper production year-on-year.

While BHP and other stakeholders are no doubt pleased with the increased production, one downside of the expansion is a number of major conveyors are now not required for mining and processing to take place.

BHP expects its first half finances will include between US$250 million and US$350 million in impairments to reflect the removal of those conveyors from its asset pool at Escondida.

“[The Los Colorados Extension] successfully ramped up during the December 2017 quarter, enabling utilisation of the three concentrators,” BHP said.

“BHP expects underlying EBIT in the December 2017 half year to include impairment charges (predominantly related to conveyors at Escondida that are no longer planned to be utilised…).”

BHP accounted for 238,500 tonnes of copper concentrate produced at Escondida in the quarter, up from 196,300 tonnes produced in the September quarter.

Elsewhere in its quarterly report, BHP showed stable iron ore production of 117 million tonnes in the first half of FY18, a 4% decline in metallurgical coal production to 20 million tonnes, and a 4% rise in energy coal to 14 million tonnes.

The miner said it had to downgrade its production guidance for metallurgical coal to between 41 and 43 million tonnes in FY18, due to the geological issues triggered by wet weather impacts at its Blackwater mine.

Chief executive Andrew Mackenzie recognised “a strong operating performance in the first half” in his statement.

“The momentum we’ve built across the wider portfolio during the second quarter will flow through to an expected stronger second half operating performance,” Mackenzie said. “Together with incremental production from latent capacity projects in iron ore and copper, we expect volume growth of 6% for the full year.”