Fortescue Metals Group will pay a record half-year dividend, sending $1.6 billion to its biggest shareholder Andrew “Twiggy” Forrest, after booming iron ore prices sent profits soaring.
Fortescue’s record interim means all three iron ore giants have reported peak or near peak results and paid out billions of dollars to shareholders.
BHP paid a record $US1.01 interim and Rio Tinto’s total for the year – including a special payment with the final was a massive $US5.57 a share.
BHP’s performance and payout makes a mockery of the silly campaign by US hedge fund, Elliott Advisers to try and break up the mining heavyweight a few years ago.
For Twiggy Forrest, it was a case of dividend deja-vu after receiving a massive payout in 2020 for 2019.
He now owns 36% of Fortescue and his will be the biggest payout to any single shareholder.
And judging by the continuing strength of iron ore prices, his take for the year could easily top $US2.5 to $US3 billion.
Fortescue increased net profit 66% to a record $US4.08 billion ($A5.2 billion) for the six months to December 31.
The miner exceeded analysts’ forecasts by announcing a higher-than-expected interim dividend of $A1.47 a share.
Fortescue’s booming result was well-guided by the company in an update earlier this month.
“Fortescue’s performance for the first half of the 2021 financial year has been outstanding,” chief executive Elizabeth Gaines said. “We are very proud of the whole team who have delivered our best half year operating and financial results since the company was established.”The record interim profit, however, comes amid upheaval in the mining giant’s senior ranks, following the shock exit of three top executives including chief operating officer Greg Lilleyman.
Fortescue told shareholders earlier this week the departures followed a review into its problem-plagued Iron Bridge magnetite project in Western Australia.
Fortescue confirmed the cost of the project had blown out by $US400 million and was now expected to cost $US3 billion.
The Oz Minerals share price jumped 0.6% to a 13-year high of $21.75 yesterday in the wake of a very strong full year result driven by gold.
Oz Minerals reported a 30% increase in underlying net profit to $212.6 million as group revenue improved 21.2% to $1.34 billion. The miner’s financial year is the same as the calendar year.
The miner’s underlying earnings before interest, tax, depreciation and amortisation (EBITDA) jumped by 31.1% to $606.3 million.
A final fully franked dividend of 17 cents a share was declared, up 2 cents a share. Total fully franked dividends for 2020 are 25 cents a share, up from 23 cents for 2019.
It wasn’t so much copper that allowed management to deliver the improved result.
It was gold that done it in 2020 (it’s a by-product of the company’s mainly copper mining).
This year though it will be copper – gold prices have weakened to under $US1,800 an ounce, but copper continues to advance and there will be more concentrate available as the Carrapateena deposit gives up more ore in its second year of production.
The net Australian-dollar gold price rose by 20% during the year compared to an 11% increase in the copper price.
Oz Minerals said that while it sold more gold in 2020 than the year before, copper sales were weak:
“Copper sales were lower following the depletion of high-grade copper ore stockpiles and the prioritisation of processing high-grade gold stockpiles at Prominent Hill,” said the miner in its ASX statement.
“However, this was partially offset by the first year of production at Carrapateen.”
Gold helped Oz Minerals achieve an enviable 45% operating margin (not far from Rio Tinto’s 51% from mostly iron ore in the Pilbara) and lifted operating cash flows by 8% to $550 million.
Copper’s outlook is improving and the rising metal price – now well above $US8,000 a tonne (around $US8,400 a tonne or $US3.88 a pound on Comex in New York) – confirms that.
The rise of electric vehicles and renewable energy sources require a lot of copper (As BHP tells us at the moment in a TV and online ad about its growing involvement in the metal) Under its “bull case” scenario, copper could even hit US$12,000 a tonne compared to its current price of around US$8,400 a tonne.
“2021 will be a year where OZ Minerals will move into our next phase of growth with major growth catalysts at all of our assets,” according to CEO Andrew Cole.
“The focus will be on safe operational delivery, on starting early works on the Carrapateena block cave following Board approval, advancing the project studies at Prominent Hill, Carrapateena and West Musgrave, and developing out the Carajás Hub strategy in Brazil, he said in the Thursday ASX release.
“We’ll also be continuing our exploration activities where possible,” he said.
OZ had a net cash balance of $32 million at the end of December- $132 million of cash and a $100 million revolving credit. In other words it is seriously under-geared and will generate more cash this year ($550 million in 2020 alone).
OZ shares hit an all-time high of $22.235 in trading yesterday.
By way of contrast to Fortescue and OZ Minerals, South32 has been left right out of the current commodity boom and its financial performance in the six months to December confirms that it is missing the bus.
Yes it boosted interim dividend and extended its share buyback program but that was to keep shareholders happy as they digest news of a 46% slump in net profit for the first half.
South32 will pay shareholders an interim dividend of US1.4 cents, up from US1.1 cents paid for the corresponding period last year.
Net profit for the half ending December 31, 2020 was $US53 million after an 8% drop in revenue to $US2.94 billion and a 32% slide in underlying earnings before interest and tax (EBITDA) to $US170 million.
The base metals miner has had to contend with pandemic-induced turmoil in the commodities market at times, but in reality it’s the absence of iron ore, gold, copper and nickel that hurt it, not the pandemic.
South 32 CEO Graham Kerr said market conditions were improving and the miner was on track for a better second half.
“We are off to a strong start in 2021…we are now seeing a rebound in demand from markets outside of China for some of our key commodities, that is underpinning a recovery in prices.”
“With this, our business is well placed to benefit as the global economy recovers, enabling us to deliver value for all our stakeholders.”
“Reflecting the strong position of our business, we recommenced our on-market share buy-back in October and today the Board has expanded the capital management program by $US250 million, leaving $US259 million to be returned,” the miner said.
It does own Cannington (silver lead mine in Queensland), coal in NSW and nickel (a huge lateritic mine in Colombia and two new project), manganese and aluminium. Its big new project is the large Hermosa zinc, silver, lead project in Arizona in the US. All interesting, but apart from nickel, there’s not much with a renewable flavour to it like copper.