What was once the worlds most diversified and probably robust miner, BHP has now been hit by $300 to $400 million in writedowns in two of its four “core” (and only remaining) outputs – coal and oil. At the same time, full year iron ore guidance was cut by 10 tonnes to 237 million due to the suspension of production at Samarco, following the disaster at the mine in Brazil that killed nearly 20 villagers and workers.
The writedowns are related to shale oil rig closures in the ‘States, redundancies, a coal mine closure and inventory writedowns due to lower commodity prices.
Today’s operational guidance comes after Rio’s announcement yesterday of its Q4 iron ore output and its own cost cutting measures.
The Mining GFC is biting, but the jaws have not yet clamped shut.
In an operational review update to the ASX, CEO Andrew Mackenzie says commodity prices fell substantially in the first half of the 2016 financial year putting pressure on the whole resources sector.
“We continue to cut costs and remain focused on safely improving our operational performance to enhance the resilience of our business,” he says.
He says the strong performance of petroleum assets offset lower shale oil volumes after again cutting the number of rigs operating in the US.
BHP didn’t give details of the redundancies, only to say that they related to “simplification of our business”.
Earlier this month, BHP Billiton announced an impairment charge of about $US$4.9 billion post-tax, or about $US7.2 billion pre-tax, against the value of its onshore US assets.
Unknown as well is the fallout from the failed Samarco mine, which could cost BHP a few billion in damages. The share price reflects the hits to BHPs credibility, haven fallen nearly 60% from its heights in 2013/2014:
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Well at least there’s no concerns with the other core output, copper – now down 50%:
