Miner broadens plans to drop coal
BHP Group says it’s getting rid of thermal coal mines to help prepare for a lower-emissions future, yet the company’s still counting on fossil fuels to drive its business for another decade.
The world’s biggest miner is accelerating the sale or spinoff of interests in mines in Australia and Colombia, and it’s planning to shed two coking coal operations and a share in an Exxon Mobil.controlled oil and gas business. The announcements came Tuesday as the company reported steady full-year profit.
Chief Executive Officer Mike Henry is starting a long-term transition of BHP’s portfolio to benefit from rising demand for renewable energy, food and electric vehicles through growth in copper, nickel and potash. At the same time, BHP wants to profit from a shift to higher-quality raw materials in China’s steel sector and an oil market that Henry said has passed though the worst virus-related risks.
“There’s going to be more demand and more upside for higher quality, hard coking coal, so we remain committed to that core of our portfolio,” Henry said. “There’s great value and returns to be generated in oil for the foreseeable future, certainly the next decade and likely beyond that.”
BHP will keep churning out the iron ore that accounts for the bulk of its profits, and it expects to increase output even as prices ease from close to a one-year high, Henry said. A price surge that has seen benchmark iron ore jump by about a third this year helped cushion annual earnings from the impact of the covid-19 pandemic.
BHP investors may be disappointed with a final dividend — of 55 cents a share — that was below analysts’ forecasts, RBC Capital Markets analyst Tyler Broda said.
The producer has been considering plans to offload its thermal coal mine in Australia and a onethird stake in the Cerrejon operation in Colombia for more than a year. Processes to exit those mines, as well as a coking coal venture with Mitsui & Co., through trade sales or a demerger into a separate listed entity, will now advance.
“We’ll land the right solution in the next year or two,” Henry said.