One of the world’s biggest miners, BHP Billiton has posted a colossal half-year loss of $5.67 billion as the decline in global commodity prices shows no sign of abatement. The Anglo-Australian miner with interests in everything from iron ore to copper to gold and oil announced the results for the 6 months to December 2015 and also revealed that it was cutting its dividend from 62 cents a share to just 16 cents.
Its shares plunged on the news.
BHP Billiton results see it join a growing line of mining companies posting horrific losses amid the deep and prolonged rout in the price of raw materials brought on by the economic slowdown in China. Anglo-American recently announced similarly catastrophic losses and vowed to cut costs and sell off assets in order to reduce debt. Anglos-Swiss miner, Glencore is in a similar position.
“It looks like very bad news across the entire sector,” said Mayuki Hoda, a commodities researcher at Mizuho Corporate Global. “The $5.67bn loss is made all the more painful when you consider that BHP posted a $5.35bn profit for the same 6 month period in 2014.”
Analysts had generally expected the negative news but the severity of the dividend cut took the market by surprise. Nevertheless, after the initial fall, the stock regained its composure to trade at $17.50 on Tuesday in Sydney.
BHP Billiton’s stock has fallen by 47% in the past 12 months highlighting the challenges facing mining groups who over-committed to expansion in anticipation of unending demand from China’s commodity-hungry economy.
Mizuho Corporate Global believes that despite the rout in the commodities complex, the bottom has been reached for iron ore and copper and that prices will rise as the supply glut is reduced by production cuts across the industry.
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