High write-downs clouded the otherwise strong annual profit of BHP, the world’s largest mining company, as of June 30.
Before a $2.7 billion write-down on its abandoned nickel business and a $3.8 billion provision for the collapse of the Samarco Dam at a Brazilian iron ore mine in 2015, BHP’s underlying profit was $13.7 billion, two percent higher than expected.
However, after taking depreciation into account, annual profit fell 39 percent to $7.9 billion, even though sales rose three percent to $55.7 billion.
The Australian mining group also cut its annual dividend by 14% from $1.70 to $1.46 per share to finance capital expenditure on mining projects this year, which rose 31% to $9.3 billion.
Mike Henry, CEO of BHP Group Ltd. Photo: Brendon Thorne/Bloomberg
According to BHP CEO Mike Henry, the latest result was due to the solid operating performance of the company’s mines, which mainly produce iron ore and copper.
Iron ore production rose 1 percent to 255 million tonnes. Copper production rose 9 percent to 1.86 million tonnes. Steelmaking coal production, the company’s third profit center, fell 23 percent to 22.3 million tonnes, partly due to the sale of several mines during the year.
The outlook for the company’s raw material portfolio remains good, Henry said.
“The longer-term fundamentals driving demand for our products remain compelling. In the near term, we expect volatility in global commodity markets, with China experiencing an uneven recovery in its end-use sectors,” he said.
Strong demand for raw materials in India
The picture is different in India. It is expected that the country will continue to be the fastest growing economy in the world.
Henry said demand for commodities in developed countries was relatively weak last fiscal year, as they felt the effects of anti-inflationary measures, sluggish industrial activity and the final aftermath of the energy crisis.
“The Chinese economy has been volatile since calendar year 2023, with a steady recovery in a number of sectors important to copper demand, such as energy infrastructure, transportation and consumer durables,” Henry said.
“The picture is more positive in India, where the recovery in capital investment remains firmly anchored and demand for commodities is robust.”
Potash, an agricultural fertilizer that BHP counts among its preferred “forward-looking” commodities, is enjoying strong demand, with global supplies this year expected to return to their 2020 peak of 72 million tonnes, amid affordability and inventory build-ups.
Potassium fertilizer
The first phase of the company’s $5.7 billion Jansen potash project in Canada is 52% complete, with production expected to begin in late 2026.
Work on the second phase of the $4.9 billion Jansen project is two percent complete, with first production not expected until 2029.
Exploration news was dominated by an initial inferred mineral resource of 1.34 million tonnes grading 0.66% copper and 0.33 grams per tonne gold at the Oak Dam copper project in South Australia.
Deeper drilling at Oak Dam returned copper grades greater than 1%.
BHP’s earnings results were received positively on the Australian stock exchange today, with shares rising 2.2% to AU$41.71.
