BHP issues ‘call to arms’ for competitive mining future

Marion Rae |

BHP CEO Mike Henry says the mining industry is ‘facing headwinds’ after the company’s profits fell.
BHP CEO Mike Henry says the mining industry is ‘facing headwinds’ after the company’s profits fell.

BHP has brushed aside concerns about the struggling nickel sector and issued a “call to arms” to governments to make sure the entire Australian mining industry remains competitive.

The resources heavyweight on Tuesday reported a sharply lower net profit of $US927 million ($A1.4 billion) for the six months to December 31, down 86 per cent.

The major iron ore, coal and copper producer slashed the value of its loss-making Western Australian nickel operations and set aside a charge for a past dam disaster in Brazil, as signalled last week.

But the underlying profit was $US6.6 billion ($A10.1 billion), in line with a year earlier, as ongoing strength in iron ore and copper dwarfed nickel woes.

Elevated pricing that is well above the cost curve is on the horizon for copper, while nickel – a tiny part of the business – is expected to remain out of whack until the late this decade, according to BHP.

Western Australia Iron Ore maintained its lead as the lowest cost major producer globally, with underlying earnings up more than a quarter to $US9.6 billion ($A14.7 billion) on higher commodity prices and lower diesel costs.

New mines, expanding and leveraging existing infrastructure, including at Yandi and Port Hedland, and building a new hub are among options for expanding the business to up to 330 million tonnes per annum.

BHP said higher quality metallurgical coal for steel furnaces will be required “for decades” and while Queensland coal assets are ideally suited to supply India the state’s royalty regime makes the region “uninvestable”.

South Australia copper performed strongly, boosted by Carrapateena and Prominent Hill that were acquired in May 2023 as part of the acquisition of OZ Minerals.

Elsewhere, production credits sought by the WA nickel industry “may not be enough” to save it, CEO Mike Henry warned.

Other nickel producers have already mothballed mines amid a glut of cheap Indonesian metal and he said BHP would be considering alternatives “in the months ahead” that could affect up to 3000 of its workers.

“We have a smelter and refinery, it’s a much more complex decision,” he said.

A handful of nickel.
A decision on the costly refurbishment of the Kalgoorlie nickel refinery needs to be made this year. (Marion Rae/AAP PHOTOS)

A decision on the costly refurbishment of the ageing Kalgoorlie nickel refinery also needs to be made this year.

Indonesian nickel backed by capital from China has flooded a market that’s not yet willing to pay a premium for battery minerals sourced from countries that have higher labour and environmental standards.

“As much as half of the global nickel production is estimated to be loss-making currently,” chief financial officer David Lamont said.

BHP’s underlying earnings before interest, taxes, depreciation, and amortisation, a key measure of profitability, rose five per cent to $US13.875 billion ($A21.215 billion) in the first half of 2023/24.

Shares in BHP closed down 1.1 per cent or 50 cents at $45.54, underperforming the broader market.

Mike Henry CEO of BHP Mining.
CEO Mike Henry says BHP will consider alternatives for nickel “in the months ahead”. (Richard Wainwright/AAP PHOTOS)

Mr Henry said the mining industry was facing “near-term headwinds” in developing resources in Australia, with the labour market the core inflationary concern.

“The single biggest thing that the government needs to do, the call to arms for government, is to ensure the policy settings in Australia ensure high levels of competitiveness globally,” he said.

“The opportunity ahead for the nation isn’t just nickel, it’s in critical minerals more broadly, be it lithium, be it copper, ongoing iron ore in a world where competition is really going to heat up in the years ahead.”

Mr Henry said Australia needed to be supporting “new and exciting” export industries and that only happens if underlying tax settings and workplace laws support high levels of productivity.

Costs going up without a commensurate increase in productivity is not a winning model for Australia, he said.

BHP declared a fully franked interim dividend of US72 cents, down from US90 cents a year earlier.