Very different years of BHP and Crown

BHP has had a very good Covid – thanks mostly to the same China that gave the world the virus. The Crown casino group has in contrast had a very bad Covid – thanks to the combination of those Chinese high rollers not flying into Melbourne and Chairman Dan locking the hometown grind punters out for so much of the year as well. And Crown’s bad Covid just got seriously worse, more complicated and allround messier, with the submissions Tuesday from the counsel assisting the Victorian Royal Commission, Adrian Finanzio SC, to commissioner Ray Finkelstein.

Finanzio made three blockbuster submissions, of which the ‘mildest’ was that Crown was unsuitable to hold a casino licence.

He also said executive chairman Helen Coonan and Melbourne CEO Xavier Walshall were unfit to be associated with the group even if Crown the corporate entity itself retained its licence. And most crushingly of all, he all-but explicitly urged commissioner Finkelstein to press the nuclear button and recommend Crown be stripped of its licence.

Apart from anything that rather did suggest that Coonan’s letter this year – after all that had happened at the preceding, all-too similar, Bergin inquiry in Sydney - “warning” of “catastrophic consequences” of any change to its Victorian licence was a “good idea at the time, very decidedly not”.

We shall have to see of course whether Commissioner Finkelstein acts on Counsel Finanzio’s urgings – and then whether Chairman Dan acts in turn.

However the Chairman has rather painted himself into a corner by stating, on the record, that if the commission recommended it, he would indeed rip up the licence. Having said that, though, I must add that the Chairman has shown a great ability to also paint himself

out of seemingly painted-in corners, if ‘necessary’.

This was not the 2021 it was supposed to be for Crown and Coonan. She had been all-but charged by commissioner Bergin to single-handedly lead Crown into a new post-Packer future, thereby cementing most directly its Barangaroo licence in Sydney, but also by implication its Melbourne and Perth licences.

At the practical corporate level, she had to do all that

and sell the company to one of the circling predators – on the one hand the usual bottom-feeding mainchancing private equity player Blackstone, and on the other its main rival the Star group. Hmm: how do you conduct an auction of a property that might be rendered valueless? Or could Crown sell its licence – by sealing a takeover – before it is stripped of it?

That points to another ‘little problem’ – suggestions in the RC that the Melbourne licence prohibited Crown Melbourne from being part of a broader corporate entity.

The share price only dipped to $10.46 Tuesday. Crown – and its three licences – is still valued at over $7bn. The second half is certainly going to be ‘interesting’.

BHP’s very good Covid was revealed in its production figures for the year; the full story will be in its profit next month.

Thanks to China, BHP sold 284m tonnes of iron ore at an average price of $US131 ($177) a tonne. Do the (rough) math: iron ore revenue in 2019-20 around $US22bn; iron ore revenue in 2020-21 around $US37bn.

And the year finished strong, setting up an even better (potentially) 2021-22 year. In the first half the price had averaged $US104 a tonne; in the June half it was $US158 and in the month of June it went over $US200.

China, though, not only gaveth, it also tooketh away – knocking back BHP’s coal. BHP had to find new markets, in India; and cop a price cut. But iron ore is the revenue and profit elephant in the BHP (and Rio and Fortescue) room. BHP also picked up nice price rises with oil and gas, thanks to OPEC and President Biden.