The world's largest mining company is flexing its muscles: Thanks to very high prices for large parts of its portfolio, BHP is showing the second-highest profit in the company's history.

Shareholders will be rewarded with a record payout.

The BHP CEO Mike Henry gives hope: an opening of China after the corona pandemic has subsided promises continued high demand.

The Australian shares temporarily rose by 5 percent in trading on the Sydney Stock Exchange.

Christopher Hein

Business correspondent for South Asia/Pacific based in Singapore.

  • Follow I follow

The Canadian, who has been in office for a good two years, has reorganized the group.

In great calm, he focused on reducing debt, increasing productivity and balancing the portfolio.

Net income rose to $30.9 billion, up 173 percent from the previous fiscal year (June 30).

However, this includes $7.3 billion that went to the BHP account from the sale of the oil and gas business to Australia's Woodside, Perth.

Adjusted for them and other one-time gains from sales, it's still a surplus of $20.3 billion.

This is 76 percent more than in the past financial year.

The pandemic has cost BHP around $1.2 billion through lower purchase volumes.

The additional costs that had to be covered due to Corona

Shareholders get more than ever

Henry earns the trust of owners with a record dividend of $3.12 per share.

Debt, which was $4.1 billion last year, has been reduced to $333 million.

However, Henry also benefits from the luck of the fittest: The Melbourne group booked a pre-tax profit of 9.5 billion dollars in its revived coal business - a year earlier it had been only 288 million dollars.

"BHP is entering the 2023 financial year in excellent shape strategically, operationally and financially and is well prepared to master what appears to be an uncertain environment in the short term," concluded Henry.

He hinted: “We have many levers for growth.

Takeovers are just one of these levers.” First, the Australians want to grow from their own resources: The iron ore division is to be increased from 283 million tons of annual output to 330 million tons.

The expansion of copper and nickel mining is being promoted.

BHP is thus turning to the rapidly growing production of electric cars.

The Australians sit on the largest copper deposits in the world, primarily in Chile.

When it comes to nickel, BHP is number two.

A new,

in a field that has been growing strongly for decades, the commissioning of the Jansen potash mine in Canada could mean 2026 for BHP.

The bottom line is that Henry plans to invest in the region of up to $10 billion this fiscal year.

A new copper smelter in Australia at the Olympic Dam deposit could cost around 3 billion dollars, twice as much as the expansion of potash production.

China could become even more important

Unlike the competition in the past few days, Henry continued to express himself positively with regard to the huge Chinese market: its opening after the pandemic will give the global economy a "tailwind", said Henry.

"We believe China will provide some stability to global growth over the next six to 12 months, if at all, and help offset some of the slowdown we're seeing elsewhere," the CEO said.

In view of his prediction, China would carry even more weight for the Australians: For the rest of the world, Henry fears an economic slowdown due to the turnaround in interest rates, the geopolitical uncertainties caused by the Russian invasion of Ukraine and inflation.

In particular, the energy crisis in Europe would be a cause for concern - because it affects industry, the consumer of BHP.

The group traditionally generates around 60 percent of its sales in China.

Australians, of course, benefit from iron ore prices above the $100 mark.

It is unclear how long they will remain at these levels and Henry indicated that prices may have peaked.

However, the ongoing pressure on extraction costs to just under $15 per ton before freight and license fees gives the Australians enormous leeway.

Henry said production costs would increase to around $19 a ton in the medium term.

The main customer China is trying to find its own source in Simandou in Africa;

there, however, production costs will be far higher than those of BHP or its competitors Fortescue and Rio Tinto for years to come.

But coal is also proving to be a profit maker: since January, the average price has been $439.60 per tonne, and $366.82 for the year as a whole – that too is 225 percent more than the average for the past year.

The production costs per ton in Queensland last year were around 85 dollars per ton.

If the traditional profiteers reach their peak, BHP wants to score points with copper, nickel for electric cars and batteries, among other things, and potash, which is important for global nutrition.