By Melanie Burton and Sameer Manekar
MELBOURNE (Reuters) – BHP Group will focus on growing its copper business through existing and new projects after a failed attempt to take over Anglo American, the company said, reporting a better-than-expected 2% rise in underlying annual profit.
Given the commodity’s outsized role in the energy transition and the deteriorating prospects for its main revenue generator, iron ore, as a result of slowing economic growth in China and increasing supply, the world’s largest listed mining company is pushing hard for expansion in the copper sector.
BHP in May backed away from its blockbuster $49 billion bid for Anglo, which would have given a significant boost to its copper business, and is now looking at other options.
“I was very clear at the time that this was not Plan A for us. Plan A is everything you see in these results,” BHP CEO Mike Henry told reporters. “We are moving forward with Plan A.”
BHP provided further details of its spending and growth plans for its key copper provinces in Chile, South Australia and Argentina after the company reported underlying attributable profit of $13.66 billion (excluding exceptional items) for the year ended June 30.
This exceeded the Visible Alpha consensus of $13.26 billion and was also higher than the previous year’s profit of $13.42 billion. However, the company posted a net loss of $5.7 billion, which was due to impairments in its nickel business in Western Australia and the dam failure in Samarco, Brazil in 2015.
BHP shares rose about 2% in early trading, outperforming Australia’s flat benchmark index.
“They have been clear about their investment and growth expectations for copper and they still see copper as a key commodity,” said Andy Foster, portfolio manager at Argo Investments. “It’s just been so difficult to make big acquisitions, so you have to make the most of your existing assets and then look for other opportunities.”
Copper accounts for about 30 percent of the mining company’s profits, but that share is expected to rise. South Australia is exploring options to produce more than 500,000 tonnes of copper annually by the early 2030s, up from 322,000 tonnes in the last financial year.
BHP announced last month that it would jointly invest C$4.5 billion (US$3.25 billion) with Canadian company Lundin Mining for its copper growth projects near the Argentine-Chilean border.
British rules prohibit BHP from making another bid for Anglo until November, should it still want to do so. Henry said BHP had no interest in buying Anglo’s coking coal stocks separately.
Nevertheless, BHP stated that it would keep its balance sheet flexible.
“We can temporarily exceed our net debt target without concerns in order to take advantage of value-enhancing opportunities in the portfolio,” the mining group said.
Net debt was $9.1 billion as of June 30, roughly in the middle of the target range of $5 billion to $15 billion.
BHP’s profit was based on record iron ore production for the second consecutive year and stable prices that offset weak coal prices and the sale of two of the company’s coal mines.
The mining group said the outlook for iron ore in the current fiscal year would depend in part on how quickly and effectively Chinese policymakers succeed in stabilizing the weak real estate sector, as well as Beijing’s approach to regulating steel production.
BHP announced an interim dividend of 74 cents per share, giving it an annual dividend of $1.46 per share. This was the lowest annual dividend since the 2020 financial year, but still ranks among the four highest dividends the company has announced in its history.
(Reporting by Sameer Manekar in Bengaluru and Melanie Burton in Melbourne; Editing by Arun Koyyur and Jamie Freed)
