BHP productivity plans stall due to outages, train derailment

BHP Olympic Dam. Image: BHP

BHP expects its productivity gains will be “broadly flat” in the 2019 financial year following several unplanned outages at Australian and Chilean operations, and a forced train derailment in the Pilbara last year.

The Olympic Dam mine in South Australia suffered an acid plant outage last August due to the failure of several boiler tubes that caused issues for two months. The Spence copper project in Chile, meanwhile, was partially closed in September due to a fire at its electro-winning plant.

BHP’s Nickel West operation in Kalgoorlie was also subject to a fire in August that led to a three-week shutdown.

In November, BHP suffered a high-profile incident after having to deliberately derail a runaway haul train en route to Port Hedland in Western Australia due to brake failure. While no one was on board the train and nobody was hurt, this led to a large financial sting for the company.

In BHP’s December half-year financial results, the company reported a combined negative impact of $US835 million ($1.16 billion) due to these four incidents, and a negative movement in productivity of $US460 million.

This means that BHP’s productivity for the 2019 financial year has been reduced from its previous guidance of $US1 billion.

BHP chief executive officer Andrew Mackenzie, commenting at an investor presentation yesterday, said the company’s second half performance would build on last year’s production problems, which have essentially been solved.

“With these issues and an elevated level of planned maintenance now behind us, we expect a strong second half performance,” Mackenzie said.

The CEO also briefly commented on the recent tailings dam disaster at Vale’s Felijao mine in Brumhadino, Brazil, calling it a tragedy.

“At BHP, we are committed to learn from this. And, as an industry, we must redouble our efforts to make sure events like this cannot happen,” he said.

BHP is a partner with Vale on the Samarco joint venture project in Brazil, which also suffered a tailings collapse in November 2015, an incident in which BHP offered no admission of liability after settling a class action last year for $US50 million.

The miner posted underlying attributable profits at continuing operations of $US4.03 billion for the latest half-year period. This was 8 per cent lower than the $US4.4 billion in the previous period.

This underlying attributable profit fell to $US3.73 billion when including the company’s onshore oil and gas assets in the United States, the sale of which BHP completed in October last year for $US10.8 billion.

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