Unified BHP swaps petroleum for potash

On August 18, BHP conceded exiting petroleum and entering potash spending $US500M to end the dual-listed company structure by Australian half to acquire the British half probably. Shareholders will receive the final dividend of US$2 per share and the total payout of about $US15.2B.

The underlying profit is pretty challenged and shrank to $US11.3B, after $US5.8B worth of impairments, including the one on its Mt Arthur thermal coal mine in NSW. However, one notable thing that is starting to be seen is that BHP indicated that it would not rigidly enforce the 15% threshold in those projects with future growth. One example is the Jasen mine, whose rate of return is between 12% to 14% with $US3B spending over the past eight years, and that is expected to offer much higher returns on investment from the first production in 2027.

By Division, WA iron ore contributed about 80% earnings with the record price in May and the “Benchmark” price at $US162.50 per tonne on August 16 for ore with 62% iron, while Chinese demand cooling and Brazilian supply rising would lead to price softness in the future. Copper Division is the second biggest contributor to earnings, with a record price at $US4.7 per pound in May as the decade high. Although 2021 is a tough year for BHP’s Queensland coking coal since China banned Australian coal, the division is expected to massive profits in 2022 at high prices inflicted by the shortage of all types of coal in China.

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