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Report: Autonomous truck issues said to affect BHP's iron ore grades

BHP Group informed Asian customers that issues related to its autonomous trucks fleet resulted in some of its iron ore shipments from Western Australia having lower-than-expected quality, The Sydney Morning Herald reported, citing industry sources.

According to the report, the mining giant was forced to mine in lower-grade areas of its key deposits in the state's Pilbara region due to its fleet of autonomous trucks, as well as other maintenance and technical challenges. The grade reduction has led to price discounts of between A$5 and A$6 per tonne, amid a softening outlook for the commodity.

In July, BHP flagged that iron ore content at its Jimblebar mine dropped to 59.5% for its fiscal 2020, from 61% previously. This followed a similar move by fellow iron ore miner Rio Tinto, which signaled operational challenges at its Greater Brockman Hub mine affecting iron ore quality and resulted in a shipment forecast cut.

Sources close to BHP, however, refuted the notion of the issue with autonomous trucks, saying that mining activity was being conducted in an area with lower grade ore.

In contrast to Rio Tinto's move to slash guidance, BHP chose to maintain current iron ore volumes at a lower grade instead of producing less at a higher grade due to volume commitments to its customers. A spokesman for BHP said in the report that it will work to lift the grade of iron ore over the course of its fiscal year.

Further, BHP said the grade issues are seen to have a "negligible" impact on overall iron ore quality in its Western Australia operations, which affect less than 1% of total products.

BHP is poised to set two record dividends as the mining giant reports Aug. 20 what is believed to be its biggest annual earnings in five years thanks to strong iron ore prices, The Australian Financial Review reported the same day.