March quarter iron ore production of 59.7 million tonnes was 10% lower than the December quarter due to COVID-18 constraints, train driver shortages and planned maintenance.

The result was partially offset by record production from the Mining Area C hub as the South Flank mine continued to ramp up.

Production for the nine months to March 31 was flat at 189.1Mt.

BHP maintained guidance of 246-255Mt attributable or 278-288Mt on a 100% basis at C1 costs of US$17.50-18.50 per tonne.

BHP CEO Mike Henry described the performance as safe and reliable.

"Our WA iron ore business continues to perform strongly as we navigate the state's first major COVID-19 wave, and we remain on track to achieve full year volume and cost guidance," he said.

Quarter-on-quarter copper production rose 1% to 369,700t, but was down 10% year-to-date.

Guidance for Escondida in Chile was lowered from 1.02-1.08Mt to 1-1.03Mt due to COVID-19 workforce impacts and public road blockades, though cost guidance was left unchanged at $1.20-1.40 per pound.

Full-year group copper guidance was lowered to 1.57-1.62Mt from 1.59-1.76Mt.

"In copper, Spence production is increasing and the Olympic Dam smelter is performing strongly as it returns to full production following planned maintenance," Henry said.

"These gains have been more than offset at Escondida by impacts from COVID-19 and public road blockades in Antofagasta, which are reflected in a revision to overall production guidance."

Metallurgical coal production jumped 20% quarter-on-quarter to 10.6Mt due to lower rainfall and productivity gains.

New South Wales energy coal production was down 13% to 2.6Mt due to wet weather and full-year cost guidance was increased to $76-81/t.

Production at Nickel West fell 13% to 18,700t due to temporary labour shortages, exacerbated by COVID-19 absenteeism.

Year-to-date production of 58,000t was also down 13%.

Full-year guidance was lowered to 80,000-85,000t from 85,000-95,000t.

Overall, group copper equivalent production for the nine months to March 31 was down 3%.

Henry said good progress was being made at the Jansen potash project in Canada.

BHP is moving away from petroleum and coal and wants more options in future facing commodities like copper and nickel, as well as potash.

 "The merger of our petroleum assets with Woodside has progressed and is set for completion in June 2022, while the divestment of our BMC business to Stanmore should complete in May 2022," Henry said.

Henry said the war in Ukraine had increased market volatility and inflationary pressures.

"We continue our work to mitigate cost pressures through a sharp focus on operational reliability and cost discipline," he said.

"While we expect conditions to improve during the course of the 2023 calendar year, we anticipate the skills shortages and overall labour market tightness in Australia and Chile to continue in the period ahead."

Jefferies analyst Christopher LaFemina said BHP was clearly benefitting from record high coal prices and strong iron ore, copper and nickel prices.

"We expect cost inflation to be significant in FY23, and we also expect iron ore and met coal prices to fall from current very high levels," he said.

"But BHP should continue to generate very strong cashflow that will lead to high capital returns and provide some downside protection to its share price.

"We see better value elsewhere in mining, and we are concerned about a near-term, demand-driven soft patch in commodity prices, but we believe the trade-off between risk and reward is balanced in BHP shares."

BHP shares fell 2.5% to A$50.99 in morning trade. Jefferies has a hold rating and $53 price target.