Shares in the world’s biggest miner, BHP (BHP), gained 1.75% to £21.48 as the firm revealed it will slash the value of its coal assets by $1.25 billion as it looks to reposition its portfolio towards ‘greener’ commodities like copper and nickel.
BHP plans to sell its New South Wales Energy Coal unit, along with a stake in a Colombian coal mine, and has said it will take a writedown of between $1.15 billion and $1.25 billion on the asset, cutting its value down to just $250 million to $350 million.
The miner said the impairment, which will show up when it publishes its half-year results to 31 December 2020 in February, reflects current market conditions for Australian thermal coal.
Thermal coal is the ‘bad’ kind used in power stations to generate electricity, whereas metallurgical coal - big business for BHP and a commodity produced by a number of other diversified miners - is used as a key ingredient in steelmaking for example.
It comes as BHP’s chief executive Mike Henry said he wants to focus on ‘future-facing options’ instead like copper and nickel, two metals key for electric vehicles and many types of renewable energy.
Big mining firms are under increasing pressure from investors to cut their production of fossil fuels, with many wanting to be seen by the market as environmental, social and governance (ESG) friendly.
‘SPECIAL DIVIDEND POSSIBLE’ AS IRON ORE OUTPUT RISES
The news came in the miner’s half-year operational review, in which it also reported a 3% rise in fourth quarter iron ore output on a year-on-year basis, plus higher production of copper, offset by lower oil and gas output.
Iron ore prices have surged in recent months and have now topped $174 per tonne, well ahead of the $100 per tonne the metal was trading at a year ago.
Jefferies analyst Christopher LaFemina said a special dividend in BHP’s half-year results could be possible due to its iron ore performance, with the firm shipping a record 145 million tonnes of the commodity in the half year to 31 December.
MINING ROUNDUP
A few other FTSE 350 miners gave updates to the market today including Chilean copper miner Antofagasta (ANTO), which gained 1.8% to £15.39 as it said it had met full year production guidance, while maintaining its output guidance for 2021.
Antofagasta reported copper production of 733,900 tonnes for 2020, in line with the lower end of its guidance of between 725,000 and 755,000 tonnes, but representing a 4.7% drop from 2019's ‘record production’ of 770,000 tonnes and mainly the result of expected lower grades at Centinela Concentrates.
For 2021, Antofagasta is guiding for copper production of between 730,000 and 760,000 tonnes. It said: ‘Guidance assumes Covid-19 will remain in place for all of 2021, limiting transport to and from site and available camp accommodation, and requiring the extensive use of remote working and the implementation of a full set of health controls at our operations and offices. Considering the unprecedented situation, further changes may be required during the year.’
FTSE 250 gold and silver miner Hochschild Mining (HOC) rallied 8.3% to 210p as it forecast increased production for 2021 after 2020 output came in at the higher end of its revised forecasts.
‘Our mines have delivered a successful fourth quarter despite continuing disruption from the pandemic and therefore I am pleased to announce that we have achieved our revised production targets for the year’, enthused chief executive Ignacio Bustamante.
He added, ‘Furthermore, our balance sheet is now in a net cash position following another period of substantial free cash flow generation driven by our strong operational performance and ongoing favourable precious metal prices.’
