Coal news and updates

BHP, the world’s biggest mining company, is considering a range of options for its US shale oil unit including a trade sale, demerger and stock market flotation.

 

In a quarterly trading update, the Anglo-Australian group said it was working on a number of options for the business, which it has declared non-core.

 

“We are preparing all appropriate documentation ahead of data rooms being opened to potential trade sale buyers by the end of the March 2018 quarter. In parallel, we continue to explore a potential exit via demerger or Initial Public Offering,” it said.

 

BHP announced plans to sell the unit in August following months of pressure from activist hedge fund Elliott Advisors, which also wants the company to simplify its corporate structure.

 

At the time, BHP’s chief executive Andrew Mackenzie said the best option was a trade sale but he would keep “a number of other mechanisms for exit open where perhaps the timing could be a little quicker.”

 

BHP’s $20bn bet on US shale oil and gas seven years ago turned the company into a top-10 producer in the country, but the oil market downturn that followed led to billions of dollars of impairments and writedowns. The division in turn became a lightning rod for dissatisfaction with the company’s strategy and how it allocates capital.

 

The comments on its US shale business came as BHP announced production numbers for the three months to the end of December that were broadly in line with market expectations.

 

In copper, the company reported production of 429,000 tonnes, up 20 per cent on the same period a year ago, boosted by an extension project at Escondida, the world’s largest copper in mine. Production of steel-making ingredient iron ore was 62m tonnes, up 3 per cent, while oil output slipped by 6 percent to 48m barrels

 

“A strong operating performance in the first half allowed us to capture the benefit of higher prices,” said Mr Mackenzie.

 

“The momentum we’ve built across the wider portfolio during the second quarter will flow through to an expected stronger second half operating performance,” he added.

 

BHP maintained full year production and cost guidance on all of its commodities apart from coking coal where wet weather and technical issues hit performance. It now expects to produce 41m to 43m tonnes of coking in the 2018 fiscal year, which runs to June, against 44m to 46m tonnes previously.

 

The weak performance of BHP’s metallurgical coal business during the quarter and the resulting impact on supply may go some way to explaining why the hard coking coal price is trading around $250 a tonne, a much higher price than analysts expected.

 

BHP also said it would take an impairment charge of $250m to $350m related to conveyors at Escondida that are no longer in use following the expansion project at the mine.

 

The miner also said its half year results in February would include exceptional items related to US president Donald Trump’s tax cuts.

 

 

Source: Financial Times