• Opinion
  • Updated Feb 22 2017 at 2:10 PM

Doom fades as BHP Billiton's memory proves selective

Andrew Mackenzie: no more talk of a diminished dividend.
Andrew Mackenzie: no more talk of a diminished dividend. Bloomberg
by The Lex Column

During an episode of transient global amnesia, your recall of recent events simply vanishes, so you cannot remember where you are or how you got there. This curious neurological disorder seems to have afflicted the heads of large mining companies.

Eighteen months ago, most were scrambling to cut dividends and sell off unwanted assets to raise cash flow. All that has been forgotten. Now they talk only of the bright future, not the bitter recent past.

Remember what BHP Billiton's chief executive Andrew Mackenzie said a year ago about lower commodity prices and a diminished dividend? Not to worry, neither does he.

Half-year results released on Tuesday were a happier affair. Adjusted earnings before interest, tax, depreciation and amortisation came in at $US9.9bn, slightly better than expectations, the adjustment due mostly to a $155m charge for the disaster at Samarco in Brazil.

More free cash flow has meant a better than expected dividend and lower net debt.

And lest shareholders forget, BHP still aspires to grow. Having won the bidding to participate in a Gulf of Mexico deepwater oil project (Trion) with Pemex, Mexico's state oil company, capital spending will nudge 15 per cent higher this year and next.

Exploration discoveries of gas near Trinidad and oil in the Gulf of Mexico, plus the development decision on Mad Dog 2 with BP, should reinforce BHP's focus in energy. And if anyone thought BHP might once exit coal, remember that its ebitda contribution has climbed to the second highest after iron ore, up 13 times year on year.

Mr Mackenzie is not alone in suffering memory failure. Anglo American's boss, Mark Cutifani, has also chosen to forget about the past; divestments there will wait. With Anglo too reporting better than expected results on the day, both men can enjoy living in the moment.

The difference between them is that BHP's share price has trailed well behind Anglo and most of its peers over the past year. That is something Mr Mackenzie's shareholders will not forget so quickly - hence the need to invest for more growth.