Investors of the blue-chip miner, BHP Billiton (ASX: BHP), hailed as the group announced for maximising cash flow with over 10% reduction in copper equivalent unit costs over medium term along with a positive near-term outlook for copper prices. The iron ore division has been flagged to reduce unit costs to less than $US13 per tonne in the medium term compared with the $US14.60 per tonne for FY17. Further, Queensland and New South Wales coal divisions will be cutting unit costs by 10% and 2.5%, respectively, below FY17 figures.
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Cost Reduction (Source: BHP Company Reports)
BHP is tracking well in terms of its Australian mines that are expected to deliver 80% of the $US2 billion in productivity gains over the next couple of years. The group is also positive about copper outlook with industrial developments and regulatory changes in China to drive the prices ahead as well. BHP has indicated for a 3% rise in copper grade by FY2023 which will coincide with deficit in copper market.
Despite the positive update, BHP stock slumped 2% on November 28, 2017 given the latest overnight weakness in commodity prices, owing to which ASX witnessed a lot of drag with most miners on the downswing. Particularly, iron ore, copper, and oil were found to be punished while gold moved above $US1300 an ounce, which is a six-week high, with movement in US dollar amidst the release of some economic data and geopolitical uncertainty. This seems to be something to do with the Fed’s view that raising rates on a frequent basis would keep inflation below the central bank’s target for a longer than expected time, as concerns grew over persistent sluggish US inflation.
Thus, most of the recent gains in commodities seem to have been erased with the overnight retreat. On November 27, 2017, the seaborne iron ore market was seen to be robust with stronger steel prices in China. London Metal Exchange nickel saw a plunge of 3.9% at $US11,570 a tonne while Zinc was down 1.4% at $US3187 at closing. Copper initially hit $US7024 a tonne and then retreated with a 0.9% decline at $US6942.
On the other hand, the yellow metal prices had soared 0.9% to $1,306.11 per troy ounce, as at November 27, 2017, and this rise enhanced the commodity’s gain for November to 2.7%. Gold is also getting attention partly owing to emanating pulls between Iran and Saudi Arabia.
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Gold Price Movement (Source: Financial Times)
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