Mining giant BHP reveals it has taken a $137 million hit because of recent power outages at its Olympic Dam operations

THE bottom line of mining giant BHP has taken a huge hit because of recent power outages at its Olympic Dam operations.

BHP Billiton chief Andrew Mackenzie warns investment is at risk from power problems.

• BHP outlines steps to keep operations going amid power failures
• BHP issues investment warning over power instability
• Big businesses unit in radical bid to stop soaring power prices
• Business SA, BHP demand fix for SA’s power crisis as prices spike

THE bottom line of mining giant BHP has taken a $137 million ($US105 million) hit because of recent power outages at its Olympic Dam operations.

Released late Tuesday as part of the company’s half-yearly results, the figure takes into account the September 28 statewide blackout. It took BHP more than a fortnight to resume full production after the outage.

After a subsequent blackout in early December, BHP chief executive Andrew Mackenzie said state and federal governments needed to get their act together on power or risk jobs and investment fleeing offshore.

“Olympic Dam’s latest outage shows Australia’s investability and jobs are placed in peril by the failure of policy to both reduce emissions and secure affordable, dispatchable and uninterrupted power,’’ he said.

“The challenge to reduce emissions and grow the economy cannot fall to renewables alone.”

Business SA’s executive director of industry and government engagement Anthony Penney said the result “absolutely highlights” the need for all levels of government to come together to find a solution.

“The finger-pointing has to stop,” he said.

“People from all over the world will be looking at BHP’s results, drawing conclusions about the investment environment in SA — what signal does that send?”

BHP generated $US611 million of revenue from its Olympic Dam operations in the six months to December 31, resulting in EBITDA of $US123 million — both of these results were down on the previous corresponding period.

Due in part to reduced copper production at Olympic Dam during the period, the company’s total copper production fell 7 per cent during the period to 712kt.

“At Olympic Dam, development into the southern mining area is progressing well and, following the major smelter maintenance campaign planned for the September 2017 quarter, is expected to support a gradual increase in copper production to 230kt in the 2021 financial year,” the company said.

Across all of its activities, BHP posted a first-half profit of $US3.2 billion ($4.2 billion) as a rebound in prices for iron ore and petroleum helped the resources giant swing back to profitability. The result is slightly better than analysts’ expectations.

“This is a strong result that follows several years of a considered and deliberate approach to improve productivity and redesign our portfolio and operating model,” Mr Mackenzie said.

BHP has benefited from steady gains in commodity prices in the latter half of 2016.

Prices for iron ore more than doubled during 2016 on improved Chinese demand, while oil prices recovered more than 40 per cent from multi-year lows hit earlier during the year.

The company said unit cash costs declined at its major assets, while it delivered $US1.2 billion through productivity gains in the half year.

BHP declared an interim dividend of 40 US cents a share, sharply higher than the 16 US cents it paid a year ago and 10 US cents above its stated dividend policy of paying a minimum 50 per cent of underlying profit.

The company recorded a charge of $US155 million in relation to the Samarco dam failure in Brazil.

It also said full year copper production guidance is under review following a workers strike at its Escondida mine in Chile.

Ahead of the results announcement, BHP shares in Australian trading closed nearly 1 per cent higher, at $26.73 each.

Labelling the US economic outlook as “uncertain”, the company said the polices of US President Donald Trump pointed to higher inflation than previously expected.

— with AAP