Business | General
BHP to take $1.7b in charges after closing mine
BHP Billiton, the world's largest mining company, may take $1.7 billion in one-time charges after closing a nickel mine in Australia and slashing 6,000 jobs as the global recession curbs demand for minerals.
- Bloomberg
- Published: 23:19 January 21, 2009
London: BHP Billiton, the world's largest mining company, may take $1.7 billion in one-time charges after closing a nickel mine in Australia and slashing 6,000 jobs as the global recession curbs demand for minerals.
The company will book a $1.2 billion pretax charge for the six months ended December 31 after shutting the Ravensthorpe mine and closing part of a refinery, BHP said yesterday in a statement. It's also cutting coking coal output as much as 15 per cent and expects a $500 million one-off cost this half, chief financial officer Alex Vanselow said on a conference call.
The future for metals demand, led by China, remains uncertain and Melbourne-based BHP continues to review all operations, Vanselow said. The company joins Rio Tinto Group, Mitsui Mining & Smelting and Anglo American in reducing output and cutting workers as metal prices, demand from factories and funding for projects collapse.
"It's a sign that we are in for a pretty sustained downturn," said Ken West, a partner at Perennial Investment Partners in Melbourne who helps manage the equivalent of $1.9 billion. "They are trying to realign their cost base."
BHP dropped 42 pence, or 3.6 per cent, to 1,111 pence at 9.51am in London. Rio, the world's third-biggest mining company, fell 4.1 per cent. BHP earlier closed down 1 percent at A$28.66 in Sydney.
The Reuters/Jefferies CRB Index of 19 raw materials has plunged 54 per cent from a record reached July 3, the peak of a six-year mining boom. Rio said yesterday it would trim aluminum production at its Alcan unit by an additional 6 percent and eliminate about 1,100 jobs.
"What we are seeing today is really unprecedented in terms of the economic circumstances," BHP's Vanselow said. "For the medium term, there will continue to be uncertainty and we need to be aligned with that."
The International Monetary Fund forecasts that advanced economies will contract simultaneously this year for the first time since World War II. Alcoa, the largest US aluminum producer, last week reported its first quarterly net loss in six years because of "historic" price declines and said it would make further output cuts in 2009 if demand continued to weaken.
BHP's decision "is a sober reminder of the unwinding of the mining boom caused by the global financial crisis, and in particular the slowing of the economy in China," Australia's Treasurer Wayne Swan said in Sydney.
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