The nation’s largest miner, BHP, has confirmed it is seeking to exit thermal coal mining globally and some of its metallurgical coal mines in Queensland in a bid to remove risk from its portfolio.
It will also seek to sell its 50 per cent stake in the Bass Strait oil and gas fields off the Victorian coast after its joint-venture partner ExxonMobil flagged it was searching for a buyer.
The announcements were made as BHP reavealed an underlying profit of $US9.1 billion ($12.6 billion) for the financial year on the back of sky-high prices for the steel-making raw material iron ore. But the profit fell short of market analysts’ expectations of $US9.4 billion. Shareholder dividends for the full year of $US1.20 were also weaker than the $US1.23 expected by analysts.
BHP chief executive Mike Henry said the full-year results reflected the “strength, resilience and quality” of its portfolio and people.
“In a year marked by the challenges of the global COVID-19 pandemic, social unrest and commodity price volatility, we were safer, more reliable and lower-cost,” Mr Henry said.
After months of signalling it is open to the prospect of exiting thermal coal – the coal used to generate energy – BHP on Tuesday said it was looking at options to exit its thermal coal assets at Mt Arthur in NSW and the Cerrejon project in Colombia, which together account for about 3 per cent of revenue. It also said it was looking to exit its BHP Mitsui Coal joint venture, which mines coking coal – used for steel production – in Queensland.
“We are moving to concentrate our coal portfolio on high-quality coking coals, with greatest potential upside for quality premiums as steel makers seek to improve blast-furnace utilisation and reduce emissions intensity,” Mr Henry said.
Thermal coal is the most carbon-intensive energy source and the focus of rising investor pressure in response to concerns surrounding its contribution to global warming. BHP’s rival Rio Tinto, the world’s second largest miner, has already removed all exposure to thermal coal while Anglo-American earlier this year said it intended to offload its thermal coal assets in the coming years.
Mr Henry said BHP would seek to exit the coal assets through either a demerger or a trade sale. He said BHP would seek to increase its exposure to “future-facing” commodities, including copper and nickel, ingredients required in the manufacture of green-energy technologies.
Morgans analyst Adrian Prendergast said the decision to seek a buyer for its Queensland coking coal assets came as a “surprise” but appeared part of a change in focus to maximise quality in its portfolio given the market conditions.
BHP’s biggest earner, iron ore, accounts for 65 per cent of its earnings. The price of the commodity has defied repeated predictions it is overdue for a fall and recently surged above $US120 a tonne driven by robust demand from Chinese steel mills and softer output from other exporters such as Brazil’s Vale due to COVID-19 disruptions.
Iron ore is also Australia’s most valuable export, this year becoming the first-ever to crack $100 billion in export value.
Profit from some of BHP’s commodities such as copper, petroleum and coal have been damaged by various impacts of COVID-19.
In early afternoon trade, BHP shares are down 0.5 per cent to $39.68.
This story originally appeared in the Sydney Morning Herald. Read the original story here.
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