Global commodities boom fuels record profits for BHP Billiton

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The Independent Online

BHP Billiton, the Anglo Australian mining giant, yesterday catapulted itself into the world's top 10 companies by earnings as the global commodities boom saw it post record profits.

But despite a net profit of $23.6bn (£14.3bn), up from $12.7bn last year, on turnover of $71.7bn, up 35 per cent for the year to 30 June, the numbers missed City forecasts.

And the company, whose earnings growth was fuelled by iron ore, where the profits doubled, gave a cautious assessment of the short-term outlook. The caution owes to the fact that both materials and labour costs are rising across the industry.

"We expect robust demand in the short and medium term, supported by commodities intensive emerging economic growth," the company said.

But it added "In the current environment, tight labour and raw materials markets are presenting a challenge for all operators, and BHP Billiton is not immune from that trend."

The company sought to placate its investors with a 16 per cent hike in its dividend to $1.01.

This, it said, reflected "confidence" in its core commodities markets and followed the earlier-than-expected completion of a $10bn share-buyback programme, which the group's chief executive, Marius Kloppers, yesterday ruled out extending.

The commodities boom has been fuelled by soaring global demand, particularly from the Chinese economy, whose appetite for steel in particular has been growing strongly.

But things could be tougher during the short term amid the current financial turmoil, which has been sparked by fears that the global economy is slowing amid sovereign debt crises in many countries. BHP admitted in its results statement yesterday that it faced "challenges" over the short term.

On the flip side, BHP's bumper profits are causing some controversy in Australia where a there is a debate currently raging about the amount of tax the government levies from mining companies. Many see this as too low and argue that Australian tax payers should benefit more from the current global commodities boom. A new proposed tax has been heavily watered down from the proposed "mining super tax" proposed by the previous government of Kevin Rudd.

It has yet to go through the country's Parliament. However, politicians from the ruling Labour party have used BHP's announcement as leverage, demanding that the new proposal is not blocked by the right-wing opposition Liberals.

Similar debates are being held in a number of resource-rich economies, with South Africa another country where powerful lobbies argue that the government should get more from the country's resources riches.

BHP Billiton's failed bid for the Canadian fertiliser maker PotashCorp cost it $314m. But it has since succeeded in acquiring the American shale gas developer Petrohawk for $15.1bn.

Glencore bids for control of Australia's Minara

The global commodities trader Glencore International has offered about A$268m (£171m) to buy out the 26.6 per cent it does not already own in Australia's second-largest nickel producer, Minara Resources.

Minara operates the Murrin Murrin nickel mine among Western Australia's gold fields, which was developed in the late 1990s, and which is set to produce just under 40,000 tons of the stainless-steel component this year. The company ranks second in Australia to BHP Billiton's Nickel West operations.

Nickel prices peaked at just under $29,500 a ton towards the end of February but have since slid to just over $20,000 a ton.

The offer, which values Minara at A$1bn, is nearly a third higher than the miner's average share price over the past month, and is Glencore's second proposed acquisition since it listed in May. Minara, however, has advised shareholders not to take any action until it has had time to review the offer.