BHP pays record dividend and becomes world’s lowest cost iron ore producer

August 20, 2019

Thanks to a rally in the price for iron ore, BHP Group, the world's biggest miner, reported its largest annual profit in five years and posted record full-year dividends.

However, the dividend slightly undershot some expectations as BHP held on to some cash in the face of risks to global economic growth such as trade war between the United States and China.

Reuters reported that BHP has handed back some $20.9 billion to investors for the financial year that ended in June including a 78 cent dividend announced on Aug. 20. That stemmed from the sale of its shale gas business and was helped by surging iron ore prices following supply outages in Brazil and Australia.

While the trade dispute between Washington and Beijing has dampened global economic growth, it has not yet affected Chinese demand for BHP's commodities such as iron ore, copper and coal in China, said Chief Executive Andrew Mackenzie.

"There's obviously been a slight cooling in appetite based on some of the concerns we have seen in the short-term for the global economy. We are not without some consideration as to what might be around the corner," he said, in reference to BHP's lack of special dividend.

Mackenzie also noted that BHP has become the world's lowest cost iron ore producer, whittling costs down to $12.86 per tonne with scope to trim them still further, as it reaped a 40 percent jump in realized prices to $77.74 from $55.62 in the first-half of the 2019 calendar year.

Iron ore prices staged a dramatic rally in the first-half with the Dalian iron benchmark more than doubling, amid the supply shortfall and more Chinese appetite for the steelmaking raw material as it ramped up infrastructure spending to support its economy.

China's iron ore imports surged 21 percent in July from the month before to their highest level since January, as supply recovered from miners in Australia and Brazil.

Mackenzie also said that BHP had its thermal coal operations under review. There has been some speculation in markets that the company could look to sell these operations.

BHP declared a final dividend of 78 cents per share, up from 63 cents last year.

Photo: A haul truck at BHP’s Newman Western Australia Mine. @BHP 2019


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