[miningmx.com] – BHP Billiton kept the straightest of faces when asked whether it intended to exit its South African coal business, BHP Billiton Energy Coal of South Africa (Becsa), saying it had challenges yet presented opportunities.
“There are still opportunities to be had at Becsa, but like all other commodities it has to focus on the safety of its employees, productivity and unit costs,” the group said in a conference call hosted by the group’s CFO Graham Kerr.
The group earlier said that it insisted on a post-tax return of at least 20% before business units could compete for capital within the group (otherwise projects did not proceed or existing businesses were deemed ex-growth).
Becsa reported a $33m underlying pre-tax loss for the first half of its financial year, ended December 31 which compares to an $8m loss at the same level in the corresponding period of the previous financial year. At $639m, revenue in the first half of the year is only 13% of the coal division’s total.
Kerr did not agree that BHP Billiton’s metallurgical coal business had outshone the thermal coal business, saying there were high performing assets in both. He added, however: “There is no doubt the energy coal business has had its challenges, but the team will focus on this.”
It was speculated earlier this month that BHP Billiton had sought to sell its Khutala colliery, a mine that supplies Eskom’s Kendal power station, but was foiled by the South African power utility.
Eskom and South Africa’s Department of Mineral Resources said they had no hand in the attempted sale of Khutala. Becsa is the third largest coal exporter in South Africa.
Commenting more broadly on asset divestitures, the group said: “We have some assets that are not part of our core business in iron ore, copper, petroleum and oil, and coal. We will continue to simplify the portfolio but this isn’t easy to do.
“What we won’t do is speculate on market rumours. Even if an asset is non-core it is not a distraction for us as they are all generating cash.”
BHP Billiton posted a 31% increase in earnings to $7.8bn for the first half of its financial year, largely on the back of higher iron ore. Costs also declined – a performance that was hailed by analysts.
“They’ve delivered the earnings number, they’ve cut their capital expenditure and they are now getting very attractive returns on capital’ of 22%, Peter Esho, chief market analyst at Invast Financial Services told Bloomberg News.
“That’s what adds shareholder value, and that’s what the large, influential fund managers wanted to see,’ he said.
