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BHP flags disruption risk for iron ore business

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BHP, the world’s biggest miner, has warned of a difficult outlook for its flagship iron ore business because of the proposed easing of border restrictions in Western Australia.

The cautionary notice came in a quarterly production report in which the company cut guidance for its coking coal division, which is based on the other side of the country, due to worker absenteeism caused by the Omicron coronavirus variant.

“The proposed easing of Western Australia’s border restrictions on February 5 2022 may introduce some short-term disruption to the operating environment as the Covid-19 pandemic evolves in the state,” BHP said in the report.

Mineral-rich Western Australia has maintained a hard line on border controls throughout the pandemic, which has been positive and negative for the mining industry.

The low rates of the virus in the region have allowed the iron ore operations run by BHP, Rio Tinto and Fortescue Metals Group to keep running at full speed.

The policy, however, has led to problems with flying in skilled workers from eastern states because of travel restrictions.

Earlier this week, Rio flagged concerns about the easing of border restrictions and the impact that could have on an already stretched workforce.

“Our guidance assumes development of the pandemic does not lead to government-imposed restrictions and widespread protracted cases related to new highly contagious variants with high severity,” Rio said, also in a trading update.

BHP’s iron ore business finished 2021 strongly, shipping at an annualised rate of 295m tonnes in the three months to December,

Wet weather and Covid disruptions, however, meant that production of coking coal was a flat 8.8m tonnes in the quarter.

BHP revised its coking coal guidance for the year to June to between 38m and 41m tonnes, down from 39m to 44m tonnes previously.

“Workforce absenteeism arising from the Covid-19 Omicron variant is anticipated to continue into the early part of the second half of the 2022 financial year,” the company said.

BHP shareholders will vote later this week on plans to collapse its dual-listed corporate structure in London and Australia and move its main stock market listing to Sydney. The proposal is likely to be approved, according to analysts.

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