Wednesday, February 1, 2023

BHP Reduces Value of Australian Thermal Coal Assets

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BHP will reduce the value of its Australian thermal coal assets to $ 1.25 billion as it seeks to divest the company and focus on other commodities.

The world’s largest miner in August announced plans to sell or divest its New South Wales Energy Coal unit as well as stakes in a Colombian coal mine and a joint venture producing another type of coal used in the manufacture of the steel.

Managing Director Mike Henry is looking to shift BHP’s portfolio further towards commodities such as copper and nickel, which will be needed more and more as the world shifts to cleaner forms or to energy and transport.

In a quarterly transaction update on Wednesday, the Anglo-Australian company said it would take a depreciation of between $ 1.15 billion and $ 1.25 billion on NSWEC, reducing its value to between $ 250 million and $ 350 million.

BHP said the depreciation reflected current market conditions for Australian thermal coal, which is used to generate electricity in power plants, as well as the Australian dollar, changes in the mining plan and an updated assessment of the likelihood of recover tax losses.

BHP cited these tax assets as one of the reasons for unifying its complex corporate structure, which involves listed companies in Australia, where the miner is headquartered, and the UK.

Australia’s coal industry has been rocked by China’s decision to ban imports due to a diplomatic row over the origins of the coronavirus pandemic.

Analysts say it will be difficult for BHP to find a buyer for its unwanted coal assets amid growing investor concerns over fossil fuels. They see the company opting for a split. Mr Henry said asset divestment could take two years.

The impact of China’s Australian coal blacklist was evident in Wednesday’s update.

The price BHP received for thermal coal in the six months ending in December averaged $ 44.35 per tonne, down 24 percent from the same period last year. The price of metallurgical coal was $ 97.61, down 31%.

Metallurgical coal is an important activity for BHP, which is the world’s leading supplier of the raw material.

On a more positive note, BHP said its flagship iron ore unit shipped a record 145 million tonnes of raw material, which is also needed to make steel, in the second half of the year to meet growing demand. from China.

China’s seemingly insatiable appetite for iron ore pushed the price BHP received on average to $ 104 per tonne, up 33%. This could allow BHP to pay a big dividend when the half-year results are announced in February.

“A special dividend to interim results is possible,” said Christopher LaFemina, analyst at Jefferies.

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