BHP in R32bn bond buyback as profits soar on price rally
The buyback, aimed at reducing debt and interest payments, has been capped at $1.9bn, excluding interest
BHP Group plans to buy back up to $1.9bn (R32bn) of its bonds as the global mining heavyweight, with a secondary listing on the JSE, delivers bumper profits on the back of a surge in industrial metal prices.
The company, alongside rivals such as Anglo American, is flush with cash as metal prices stage a dramatic rebound from historic lows reached in March on expectations of a similar bounce back in the world economy that is being fed by huge industrial stimulus.
BHP, whose coal mining operations in SA were hived off to South32 five years ago to focus on iron ore, copper, nickel and metallurgical coal, said it would use its own cash resources to fund the programme, which excludes interest.
“The multicurrency plan, which shall be funded from surplus cash, aims to reduce the group’s gross debt balance, reduce associated interest costs and enhance the group’s capital structure,” the company said in a statement.
The programme, started on Wednesday, is due to expire on September 30.
As of the end of June, the group had net debt of $12bn, up about 27% from a year previously, though this was at the lower end of its target range of $12bn-$17bn.
Total interest-bearing liabilities stood at $27bn, up about 9% from the prior year. Part of the increase in debt was attributable to accounting changes, BHP said.
At the same time, BHP reported annual profits of about $9bn when it issued its earnings report in August as an iron ore price rally offset the impact of Covid-19 disruptions on output. Though dividend at 55c a share was lower than a year earlier, it was still in line with the company’s payout ratio policy.
Mining companies have been riding on the back of a rally in industrial metal prices as investors piled into commodities such as iron ore and copper on evidence of an uptick in economic activity in China, the world’s biggest consumer.
Last week, Sibanye-Stillwater returned to dividend payments after a four-year pause as its mines in SA, Zimbabwe and US gave the group record interim results. It rewarded shareholders with a total of R1.34bn thanks to a 15% jump in earnings
Impala Platinum, the world number three source of platinum group metals (PGMs), expects a five-fold increase in annual headline earnings as soaring metal prices offset a small dip in sales.
Implats, which vies for the global third place with Russia’s Norilsk Nickel, is due to issue its earnings on Thursday.
Shares in BHP ended 1.47% lower at R382.81, having risen about R18 so far in 2020.
With Tiisetso Motsoeneng
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