Rio Tinto PLC (LSE:RIO) and BHP Group Ltd (LSE:BHP, ASX:BHP) kick off the big miners reporting season next week as the recessionary clouds gather over the sector.
After a run of huge profits and even larger dividend payouts, the mood has changed due to price weakness in iron ore and copper, two of Rio and BHP’s big earners, even more so for copper colossus Antofagasta PLC (LSE:ANTO), which also reports this week.
Rio even reduced its dividend in July as all financial metrics headed lower.
China is key to the fortunes of the big two and Rio Tinto has been the more cautious in its outlook statements though it made a big statement about the future of copper with its US$3.3bn tidy-up of the ownership of the Oyu Tolgoi mine in Mongolia.
Rio's update is about production so there won't be any financial numbers, but forecasts for this year 320-335Mt of iron ore, 500 to 575,000 tonnes of mined copper and 230-290,000t of refined.
BHP is no longer a member of the FTSE 100 after shifting its primary listing to Sydney, but its shares still trade in the UK with iron ore, copper, coal, nickel and potash its staples now after it spun off its oil interests.
Unlike Rio, BHP’s chief executive Mike Henry has been reasonably sanguine about the situation in China where the property crisis and renewed outbreaks of Covid have dented demand from steel makers for iron ore.
“We think that over the next 6-12 months, China, if anything, is going to provide some stability to global growth and will help offset some of the slowing that we see elsewhere,” Henry said in August.
China typically accounts for more than 60% of BHP’s revenue so whether that view is intact will be one of key things to watch in BHP's update on the 19th.
Chile-focused Antofagasta, which is one of London's blue-chip miners, reported a 48% drop in first-half earnings on the back of a fall in copper output and prices and higher input costs, but said it expects an improvement in the second half.
"We expect the remainder of the year to look very different from the first half – as production improves quarter-on-quarter, we ship and sell the concentrate that was impacted by the concentrate pipeline incident, and the desalination plant at Los Pelambres starts, significantly alleviating the issue of water availability,” said chief executive Iván Arriagada.
Analysts at US bank Citigroup expect a stable operational performance across the mining sector and production numbers are likely to “improve sequentially” for most companies following the weak first half of 2022.
“Production guidance revisions and any commentary on cost inflation are likely to be key areas of interest” with any movement likely to be fine-tuning rather than big changes, it said.