BHP Billiton, the world’s largest mining company by market value, has reported a loss for the year due to a combination of low commodity prices and the disaster in Brazil. The Anglo-Australian multinational mining, metals and petroleum company reported a net loss of $6.4 billion for the year ended June 30.
Headquartered in Melbourne Australia, BHP Billiton has been affected by the lack of growth in China. This had caused the company to experience several years of reducing demand and then it was badly hit by the Brazil Samarco mining disaster.
Samarco is the name for a joint venture between BHP Billiton and Brazilian company Vale (in which the Brazilian government owns 12 Golden Shares.) On November 5, 2015, a dam collapsed at a mining site owned by the Samarco consortium leading to the deaths of 19 people and massive damage to the environment.
The companies agreed to pay initially a sum equivalent to $1.55 billion in compensation. The assets in Brazil of both BHP and Vale were frozen in the belief that the companies were not able to meet the ultimate costs involved. Now, almost year later, the financial implications are still unclear. A $48 billion lawsuit is still in place, although that is unlikely to ultimately be a realistic figure.
The cause of the dam bursting is not yet clear, and Samarco has appointed a law firm to establish the cause and its level of responsibility. The company is still confident of long term profits once this issue has been resolved. Meantime, it has reduced its dividend to 30 cents compared to last year’s 62 cents, and also reversed its previous policy to steadily increase dividends.
BHP Billiton expects commodity prices to increase after a bad period. There are signs that iron ore and oil prices will shortly begin to rise. BHP was an Australian business founded back in the mid 19th century. Billiton started life as an 1850s tin mine Indonesia, owned by Anglo-Dutch interests. The two combined as BHP Billiton in 2001 – the birth of global mining giant.
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