BHP Billiton, the world's biggest mining company, reported net profits of $10.5bn (£5.5bn) and announced it would give $3bn to shareholders yesterday, even as it continued to face down wage demands from striking workers in Chile.
The group had already declared a $2bn share buy-back programme after the first half of its financial year. Yesterday it added a further $3bn to that scheme with its full-year results for 2006, taking the total buy-backs to $5bn. On top of that, it will pay shareholders $2.1bn in dividends for the year ended 30 June.
A strike by workers at the Escondida copper mine in northern Chile, in which BHP has a 57.5 per cent stake, has entered its third week. Workers and the company have moved closer in their offers to settle but negotiations have broken down amid rumours that BHP is preparing to bring in outsiders to work the mine. The 2,000 striking workers are demanding an 8 per cent wage increase in real terms; the company is offering 4 per cent. BHP has also offered a one-off bonus package and reduced-rate loan worth $32,000 to each worker.
Yesterday's financial results showed just how profitable Escondida is for BHP. As a result of soaring commodity prices, group profits before interest and tax came in at $15.3bn, of which the Escondida mine contributed $3.2bn or some $12m a day.
Dick Blin, a spokesman for the Brussels-based International Federation of Chemical, Energy, Mine and General Workers' Unions, said: "BHP and other companies in this sector have the ability to meet workers' demands. The rewards are vast in this business. Here shareholders are being rewarded while the workers are on strike."
Originally, the workers had demanded a 13 per cent real wages increase plus bonus, while BHP offered 1.5 per cent plus an unspecified bonus.
Chip Goodyear, BHP's chief executive, said: "We are disappointed that we have been unable to reach agreement with the union at Escondida. We created an offer that we feel is attractive. Our workforce is one of the highest paid in Chile and this is one of the most attractive packages offered to the workforce in that region."
Mr Goodyear, who enjoyed a 20 per cent jump in his remuneration last year to $4.9m, added: "We will continue to work hard to get to a point where we can get Escondida back to full production."
The Escondida mine is currently running at 40 to 50 per cent of normal output, which has pushed up global copper prices. Escondida, the largest privately owned copper mine, usually provides 8 per cent of global output.
Simon Toyne, an analyst at Numis Securities in London, said: "The company [BHP] will not want to be seen to back down too easily. That would encourage further strikes at its other mines."
Mr Toyne estimated that at the current copper price, the mine would be making a profit of some $22m a day, of which BHP's share would be about $16m a day.
Instead, according to the company, the mine is losing some $16m a day in the 16-day-old strike. Yesterday the unions in Chile said they were willing to hold out for 60 days.
In future markets trading in London, the price of copper remained close to all-time highs but eased $10 to close at $7,610 a tonne.
Mr Goodyear said that unforeseen events, such as strikes, meant that copper mine production this year will be 600,000 tonnes less than had been forecast at the start of 2006.Reuse content