Why Mining Giant BHP Shares Are Sliding Premarket Tuesday

BHP Group Ltd BHP shares are trading lower after it reported results for the half year ended December 31, 2023.

Revenue rose 6% Y/Y to $27.2 billion, led by higher iron ore and copper prices and the contribution of new mines Prominent Hill and Carrapateena. 

Unit costs increased 5.4% across its major assets on disciplined cost, operational performance, and the normalization of commodity-linked consumable prices such as diesel and acid. 

Copper production rose 7% Y/Y to 894kt, and the average realized price was up 5% Y/Y to $3.66/lb. Iron ore production was down 2% Y/Y to 129Mt, and the average realized price rose 21% Y/Y to $103.70/wmt.

Underlying EBITDA grew 5% Y/Y to $13.9 billion and the margin stood at 53.3% vs. 53.5% a year ago, with Western Australia Iron Ore (WAIO) maintaining its lead as the lowest-cost major iron ore producer globally.

Underlying profit remained broadly flat Y/Y at $6.6 billion in the year. Net operating cash flow grew 31% Y/Y to $8.9 billion on higher underlying EBITDA and lower income tax and royalty-related taxation payments. 

Capital and exploration expenditures came in at $4.7 billion, up 57% Y/Y. Net debt stood at $12.6 billion as of December 2023.

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Dividend: BHP declared an interim dividend per share of $0.72, to be paid on March 28, 2024, equating to a payout ratio of 56%.

Outlook: The company continues to expect capital and exploration expenditures of ~$10 billion per annum for FY24 and FY25, including exploration of $0.4 billion in FY24.

For FY24, BHP still projects Copper production of 1,720 – 1,910 kt and Iron ore production of 254 – 264.5 Mt.

Mike Henry, Chief Executive Officer, said, “The period also had its challenges, with adjustments relating to Nickel West, West Musgrave and Samarco offsetting an otherwise solid operational performance and overall healthy commodity prices.”

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“We’ve seen volatility in global commodity prices and demand in the developed world has been softer than expected. That said, China demand is healthy despite weakness in housing and India remains a bright spot. In Australia, the mining industry is facing near-term headwinds in developing resources and it’s essential that the right industrial relations and fiscal settings are in place to support the sector’s ability to compete and win in global markets.”

Price Action: BHP shares are down by 1.94% at $59.17 premarket on the last check Tuesday.