Big Australian rakes in iron ore cash but alarmed by trade war BHP eyeing exit on coal

BHP has given its strongest indication yet it is looking to sell off its thermal coal mines, saying it is considering “a number of options” for the business unit.

The mining titan has also warned the Us-china trade war is acting as a brake on global growth but says it has not been hit with any fallout from increasing tensions in Australia’s relationship with the Asian powerhouse.

“We continue to enjoy strong sales to China but there is no doubt that while this (trade war) continues, it is putting a bit of a dampener on world economic growth,” chief executive Andrew Mackenzie said yesterday.

“Ultimately, if not yet, it will impact the demand for our products.”

He was speaking after BHP more than doubled its full-year profit and treated investors to a record dividend as it banked the spoils of a surge in iron ore prices.

Speculation is mounting the group will join rival Rio Tinto in selling out of thermal coal, which is used to make electricity.

The world’s biggest miner has previously said it will not increase production given it expects coal to be “phased out, possibly sooner than expected”.

The Melbourne-based company operates thermal coal mines in Australia and Colombia. Its exposure to the contentious energy source has attracted the ire of activist investors while a growing number of the world’s biggest sovereign wealth funds have begun to pull their money from companies that dig up the black rock.

Mr Mackenzie yesterday said BHP was “continuing to review” the place of thermal coal within its overall portfolio, which covers iron ore, copper and oil and gas.

“We are considering a number of options for it,” he said.

“We, of course, have been very clear that the longer term outlook for the supply-demand balance in the energy coal market, for a raft of reasons, is not as attractive as some of our more major businesses.”

For the year to June, BHP’S net profit more than doubled to $US8.31 billion ($12.3 billion).

BHP got 40 per cent more, on average, for each tonne of iron ore it sold in the year to June compared with the previous year as another dam disaster in Brazil curbed global production.

BHP declared a record final divided of US78C a share, showering investors with a whopping $US17.1 billion in dividends and buybacks for the year.

As well as facing the threat of a drawn out trade war, Australia’s biggest company also has to negotiate an increasingly tense relationship between Beijing and Canberra.

“I don’t find, as yet, that it is leading to a threat to our business and our trade with China,” Mr Mackenzie said.

“It’s not an easy balance to manage for Australian politicians.”