Enter Details

Comment on stories, receive email newsletters & alerts.

This is your permanent identity for Business Insider Australia
Your email must be valid for account activation
Minimum of 8 standard keyboard characters


Email newsletters but will contain a brief summary of our top stories and news alerts.

Forgotten Password

Enter Details

Back to log in

BHP's profit will be hit by at least another $400 million in redundancy costs and writedowns

A protestor splashes muddy water at the Vale headquarters in Rio de Janeiro. The bursting of two dams at the Samarco mine, jointly owned with BHP, unleashed a flood of muddy waste. Mario Tama/Getty Images

The bad news keeps coming from BHP Billiton.

This time, the world’s biggest miner says its underlying profit for the December half year will be hit by additional charges of between $US300 million ($A434 million) and $US450 million ($A650 million) mostly relating to redundancies and oil shale rig closures in the US.

Still to come is an official estimate of the damage and penalties from the fatal Brazil mine disaster in November.

BHP shares were trading at $14.24, down 3.3%.

In an operational review update to the ASX, CEO Andrew Mackenzie says commodity prices fell substantially in the first half of the 2016 financial year putting pressure on the whole resources sector.

“We continue to cut costs and remain focused on safely improving our operational performance to enhance the resilience of our business,” he says.

He says the strong performance of petroleum assets offset lower shale oil volumes after again cutting the number of rigs operating in the US.

The $US300 million to $US450 million additional charges in the six months relate to redundancies, rig closures in the US, closure of the Crinum coal mine, inventory write-downs reflecting significantly weaker commodity prices including global royalty and taxation matters. Here are the estimates:

BHP didn’t give details of the redundancies, only to say that they related to “simplification of our business”.

Earlier this month, BHP Billiton announced an impairment charge of about $US$4.9 billion post-tax, or about $US7.2 billion pre-tax, against the value of its onshore US assets.

BHP also faces the fall out from the November fatal mine disaster in Brazil.

A tailings dam breach at the Samarco iron ore mine in Minas Gerais, sent a wall of mine downstream to a village.

So far, 17 people have been confirmed dead, including five members of a village and 12 people who were working on the dams. Two are still unaccounted for.

“Samarco is continuing to work on quantifying the estimated costs related to the tragedy and, therefore, it is too early to provide an estimate of the financial impact,” BHP said today.

The federal and state governments in Brazil have taken the Samarco iron ore mine, BHP and Vale to court seeking clean-up costs and damages.

The action demands a fund of BRL 20 billion ($A7 billion). BHP’s share would be half that, about $A3.5 billion.

BHP shares have been hammered since the disaster, dropping to GFC levels, though falling iron ore and crude oil prices have also taken a toll. Its shares closed yesterday at $14.73, down from a year high of $31.

Today BHP cut total full year iron ore guidance by 10 tonnes to 237 million due to the suspension of production at Samarco.

Follow Business Insider Australia on Facebook, Twitter, and LinkedIn