(Feb 17): BHP Group said first-half earnings jumped by more than a fifth, as a years-long push to boost copper production and a surge in prices for the red metal helped to offset weakness in its China-focused iron ore and steelmaking coal businesses.
Long dominated by its Australian iron ore operations, the world’s largest miner said on Tuesday that its copper business now accounted for more than half of profits. That came after acquisitions and the expansion of the massive Escondida mine in Chile, which have helped hold up output, but also to a historic metals rally.
The combination pushed BHP’s underlying attributable profit to US$6.2 billion, broadly in line with analyst forecasts. Shares climbed as much as 7.3% in Sydney to a record, their biggest gain in more than 10 months.
“We have achieved around 30% growth in copper production in the last four years, positioning us ahead of the strengthening copper market that we had anticipated,” chief executive officer Mike Henry said.
The copper division saw underlying earnings before interest, tax, depreciation and amortisation climb 59% to US$8 billion. Realised prices were up by almost a third over the period.
Earnings from its iron ore business edged 4% higher, even as “tough” negotiations with China’s state-owned iron ore buyer continue. Henry said the company’s wider relationship with steel mills was “deep and strategic” and added that the miner was confident a resolution would be reached.
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BHP, which had long stayed away from large deals, has returned to the M&A fray as the sector pushes for growth, but success has proved elusive. The company’s approaches for rival Anglo American Plc — most recently an effort to gatecrash the miner’s tie-up with Teck Resources Ltd — were repeatedly thwarted, prompting the miner to consider other options.
“If there was an opportunity that we thought we could create material value for BHP shareholders, through acquiring other assets, we would be willing to have a go at it — but that’s such a small opportunity set,” Henry told reporters.
“Hence the real focus is on running our existing business ever better and unlocking organic growth that we have in the portfolio.”
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The company announced on Tuesday that it would receive US$4.3 billion under a long-term silver streaming agreement with Wheaton Precious Metals Corp, an effort to make the most of high prices for the metal. The deal relates to silver produced as a by-product at the Antamina copper mine in Peru, in which the Australian miner has a 33.75% share.
BHP said it would pay an interim dividend of 73 cents, equivalent to a 60% payout ratio.
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