Why has the BHP share price slipped today?

Posted: 19 October 2021 12:12 pm
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Shares in mining giant BHP have slipped 17% in the last 6 months.

Shares in the world's biggest miner BHP (ASX: BHP) are among the top traded shares on the ASX boards on Tuesday. But the stock is also among the laggards, and was trading 1.7% lower at $38.54 at the time of writing.

Why is the BHP stock price lower?

Today, the mining giant released its operational review for the September quarter, and as in the case of its peers, the news is not inspiring for investors.

BHP outlined a 5% decline in first-quarter iron ore production compared to a year ago to 71 million tonnes, marking the third straight quarter that it has seen a drop in output for the key steel making ingredient. It comes at a time when iron ore continues to trade above US$100 a tonne.

It attributed the fall to maintenance work at its Jimblebar mine in the Pilbara and a shortage of rail labour caused by COVID-19 border restrictions.

The global miner also reported a 9% drop in annual copper production, a 9% decline in metallurgical coal output and a 20% slide in nickel output. Thermal coal production rose 17% from a year ago, while output at its soon to be demerged petroleum division bumped up 3% on year.

However, unlike rival Rio Tinto, the world's largest miner has left its annual production forecast for iron ore unchanged at 278-288 million tonnes.

Petroleum demerger

Meanwhile, the focus remains on the company's plan to hive off its petroleum business to Woodside in a $14 billion deal announced in August.

BHP said at the time that it would complete negotiations over the final details of the deal by October. On Tuesday, the company said it now expects to deliver the final transaction documents to shareholders in November, although the deal is still expected to close by the end of the current financial year.

BHP and Woodside will make a final investment decision (FID) on the $16 billion Scarborough gas project by 15 December, with both agreeing that BHP will sell its interest in the gas field to Woodside if a merger deal does not go ahead.

Despite the slight delay, analysts are bullish about the mining giant's soon-to-be simplified structure.

"We think the differential value driver will be the increased certainty around unification and petroleum merger benefits. The unification transition period may add complexity/uncertainty and the shareholder votes are not certain to pass, but we think this structure is better for shareholders," RBC Capital Markets analyst Kaan Peker said in a note.

Investors would be hoping that optimism reflects in the BHP share price, which has lost 17% of its value in the last 6 months.

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