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BHP making loads of money as coal comes roaring back

February 21, 2022

On 15 February the world’s biggest mining company announced its half year results to December 2021. And the profits were huge, especially from coal.

2020-21 was a bit leaner than usual for BHP due to the impacts of the pandemic. But it stormed back in the last half year, almost entirely on the back on high prices in coal and iron ore.

Profit leapt from to US$9.5 billion from US$3.9 billion for the corresponding previous half year. On the basis of “underlying profit” that BHP prefers as it knocks out one-off impacts, profit leapt from US$9.9 billion to US$14.9 billion. And we are talking about just 6 months here, not the full year.

The big (well, big unless you are making such huge profits) adverse impact was the write-off of another US$822 million for costs rising from the Samarco dam failure in Brazil many years ago. That event has cost the company many billions, but they have managed to spread the impact over several years.

The single biggest source of revenue and profit remains Western Australia iron ore – with underlying EBITDA (cash) earnings increasing from US$10.2b to US$11.2b. That’s on revenue of US$15.8b – meaning most revenue is cash profit!

Coal came roaring back from a US$202m loss in the second half of 2020 to a massive US$2.6b cash profit for the 6 months to December 2021. The cash margin for Queensland Coal (mostly coking coal) was 51% ie. more than half of all revenue was cash profit.

The Mt Arthur thermal coal mine made good money too – moving from a US$130m loss to a cash operating profit of US$458m.

Nevertheless the Mt Arthur mine remains for sale as the company seeks to leave thermal coal production altogether. There were no details given on the sale process, which is taking longer than expected.

For the same reason – carbon emissions – the company is also in the process of shifting its oil and gas assets from BHP to Woodside via a merger of those assets.

There is little good news for workers in the results. The best is that the company had no fatalities across its operations. But the report and comments to analysts make it clear that the company remains committed to its Operations Services strategy of making large cuts to wages and conditions through the in-house labour contracting firm.

By National Research Director Peter Colley

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