Forget BHP’s big profit drop – the Big Australian’s results are solid in a challenging environment. The real story here is how three big forces in global mining are playing out.
. Weaker commodity prices and industry-wide cost pressures were always going to drag on the 2023 numbers, and BHP’s key metrics look solid; for the seventh straight year, the Big Australian has produced an EBITDA margin above 50 per cent, and net operating cashflow above $US15 billion .
BHP’s view is that this shift in the mining sector’s cost base does two things. First, it will provide support for commodity prices at a higher level than in previous cycles. And secondly, it should generally give low-cost producers like BHP a better margin than higher-cost producers. As BHP’s Jansen potash heads towards first production in the 2026 financial year, capex needs to grow. And there’s also increased capex as a result of, more money for exploration broadly and a suite of bets on early-stage miners that BHP hopes might strike it big.
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