The high iron ore prices in the final half of 2019 saw BHP’s profit soar nearly 40% on the back of the boom in the price of steelmaking commodity, pushing interim dividend to a record 65 US cents a share from 55 cents paid previously.
The market had optimistically looked for 71 US cents a share payout for the December 2019 half but BHP said it had taken a “cautious approach” in light of the near-term volatility posed by the coronavirus crisis.
But the largesse may not last with the company warning demand could be affected by the coronavirus outbreak in China and spill over into other regions and global sales.
Underlying half-year profit had jumped 39% to $US5.2 billion ($A7.8 billion), broadly in line with market forecasts. Statutory profit was up 29% to $US4.87 billion ($A7.25 billion)
Revenue rose 7% to $U22.3 billion.
Iron ore prices jumped to five months highs on Monday at more than $US90 a tonne after Vale last week cut its forecast production for the March quarter by 5 million tonnes and Rio Tinto on Monday night trimmed its 2020 sales forecast by 6 million tonnes (see separate story).
Mr. Henry expressed confidence in the miner’s resilience. He said the human toll from the deadly virus was “tragic” but the economic hit would be “muted” if the virus was contained by March 31.
“Despite near term uncertainty – due to the coronavirus outbreak, trade policy and geopolitics – we remain convinced about the positive underlying fundamentals of our commodities,” he said on Tuesday.
“We see enormous potential to reliably deliver exceptional financial and operational performance, and to grow value and returns.”
Mr. Henry said BHP had delivered a strong set of half-year results, grounded in solid operational performance.
“BHP is in good shape. We have passionate and committed people hungry to perform,” he said. “We have brought together high-quality assets in a simple portfolio that allows us to create value at scale,” Mr. Henry said in the statement.
The shares rose as high as $38.96 yesterday and closed up 0.8% at $38.78 in a market that traded in the red all day.
Mr. Henry said repeated the previously expressed desire from BHP and its bosses that it wants to focus on “future-facing commodities” – copper, nickel and potentially potash – as the world moves to a decarbonised economy.
“We need more copper and we need more nickel,” he said.
BHP in November increased its stake in SolGold, the majority owner and operator of the Cascabel porphyry copper-gold project in Ecuador.
Mr. Henry said he preferred to gain more copper and nickel by exploring and early-stage entry, rather than acquisition.
The company has struck nickel offtake deals with Mincor (in 2019) and Western Areas (in January).
It is expanding its production at its Nickel West business and has spent hundreds of millions of dollars upgrading the Olympic Dam in South Australia (a big copper, gold, silver and uranium deposit).
Last year it outlined a seemingly smaller deposit similar to Olympic Dam nearby in South Australia).
With this sort of approach, you have to wonder how long the thermal coal operations in NSW and Queensland and in Columbia will remain in BHP’s control.