BHP's best numbers in years comes with a $2.3 billion asterisk

BHP, the mining giant with deep South African roots, has posted record profits driven by copper rather than iron ore. Underlying EBITDA rose 27% to $32.9 billion, and shareholders received a record $115 billion over the past decade. But there are costs too: a $2.3 billion writedown on an unfinished Canadian potash project, and ongoing payments linked to Brazil's 2015 Samarco dam disaster. These numbers belong to outgoing CEO Mike Henry. His successor, South African-born Brandon Craig, now inherits decisions on Jansen's costs and BHP's idle nickel unit, while Anglo American shareholders, many on the JSE, may reflect on the 2024 takeover BHP abandoned..By Alec Hogg.I remember an intimate lunch in a downtown Johannesburg boardroom almost a quarter century ago. The late Brian Gilbertson was feeling his oats after taking charge of the newly merged BHP Billiton whose merger created the world’s largest mining group. And was explaining to the handful of editors why his strategy of mining at the lowest cost through focusing on the highest quality deposits was a winner. It was the kind of discussion that makes an indelible imprint. Much has been written and broadcast about Gilbertson’s prickly personality, but even his harshest critics cannot fault the man’s laser-like focus based on pursuing the more economically rational paths. Although the Billiton part of the name has been dropped; and the SA assets long ago hived off into South32, Gilbertson’s spirit still remains. The number BHP wants shareholders to remember from its results for the year to end June 2026 is net debt of $8.7 billion - comfortably below the bottom end of its published target of between $10 billion to $20 billion. Here's the one it would rather you skimmed past: a $2.3 billion writedown on a potash mine in Canada that hasn't produced a single tonne yet.Both are true. Both matter. That's the thing about mining giants the size of BHP — there's always a headline number and a footnote, and the footnote usually tells you more.Start with the headline, because it's genuinely impressive. Revenue for the year rose 15% to $58.8 billion. Underlying EBITDA jumped 27% to a record $32.9 billion, at a margin of 59% — the best profit ratio in four years and at a level one rarely sees outside the world’s best tech companies. Further evidence of the brilliance of Gilbertson’s credo of high quality deposits delivering the lowest costs. Big profit margins carry through to free cash flow, which for BHP nearly doubled, up 83% to $9.8 billion. The final dividend of 99 US cents brings the full-year payout to 172 US cents, the highest in four years, and takes total returned to shareholders in the past decade to over $115 billion. Underlying return on capital employed climbed to 26.1% from 20.6%. By any conventional measure, this is BHP firing on all cylinders.And here's the story behind it: for the first time in the company's history, copper — not iron ore — is the engine. Copper contributed 54% of group EBITDA, a record $18.2 billion, up 48%. That's a genuine milestone for a business whose cornerstone iron ore from Australia’s Pilbara.Dig into the granular and you’ll see Gilbertson’s spirit lives on. Copper production actually fell 3% to 1,953 kilotonnes, in line with the lower output from Escondida, the crown jewel. The extra billions didn't come from digging up more of the red metal: they came from the price, which averaged $5.74 a pound, up 35% on the year - and lower costs. Escondida cut unit costs 10%, Copper South Australia by a startling 73% — but "record earnings from record cost control and record prices" is a different story to the one implied by the "operational excellence" language in the group’s statements. Most of this was a gift from the market, not from miners.Iron ore, the business that built BHP, essentially stood still. Western Australian production was flat at 257 million tonnes, and unit costs actually rose 6% to $19.66 a tonne — a stronger Aussie dollar and higher diesel prices eating into the industry's lowest-cost of production. EBITDA from the iron ore business was flat. Copper didn't overtake iron ore because it suddenly got bigger. It overtook the long-time stalwart because iron ore stalled.Which brings us to the Anglo American question BizNews readers will remember. BHP spent much of 2024 chasing a near $50 billion takeover of Anglo American, largely to get its hands on Anglo's Chilean and Peruvian copper. It walked away when Anglo's board wouldn't play ball. Two years on, BHP has simply grown its way to a copper-dominant earnings mix anyway — organically, without the takeover premium, and without having to digest Anglo's platinum and De Beers baggage in the process. Anglo shareholders, many of them South African, are entitled to wonder whether they dodged a bullet or missed a payday. Either way, BHP didn't need the big fish it fought so hard to land.On to parts of the results that deserve more scrutiny than a two-line mention. BHP took $3.4 billion in exceptional charges this year — the gap between the $13.2 billion underlying profit and the $9.8 billion actually attributable to shareholders. Of that, $2.3 billion is Jansen, the Canadian potash project meant to be BHP's big bet on diversifying beyond iron ore and copper. Stage 2's investment estimate blew out from $4.9 billion to $6.9 billion — a 41% increase — on cost inflation, before a tonne of product has been sold. Stage 1 is 84% complete and still on schedule for mid-2027, so this isn't a disaster. But it's an expensive lesson in how quickly "world-class, low-cost asset" language can collide with real-world capital intensity.The other blot is $1.1 billion written off on Samarco — a reminder that a decade after the Fundão dam collapsed in Brazil, BHP is still writing cheques. The provision sits at $5.2 billion; total compensation paid since 2015 has reached $17.3 billion. Some liabilities never really close.And then, days after the end of this financial year (June 30), a contractor died at BMA's Peak Downs mine in Queensland — the tragedy which led the annual report statements of both South African-born, bred and educated CEO Brandon Craig (UKZN, Unisa MBL) and chairman Ross McEwan. It's a sober note attached to an otherwise triumphant set of numbers, and credit to BHP for not burying it..Read more:.Miningweb: BHP-China iron ore dispute escalates, risking months of trade gridlock.Saffer Craig only became CEO on 1 July, which means these numbers are effectively his predecessor Mike Henry's parting gift, not Craig's first success. His actual test starts now: deciding the fate of the mothballed Western Australia Nickel business by February 2027, keeping potash project Jansen's ballooning costs under control, and working out what to do with a balance sheet so lean it's already through the floor of its own target range. The last of these is a lovely problem to have. With that kind of firepower sitting idle, the real question BHP hasn't answered today is the reason for stockpiling all that capital. With Anglo American now out of the picture, The Big Australian no longer has an obvious target..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox every morning on weekdays. Register here. Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here.

BHP's best numbers in years comes with a $2.3 billion asterisk

Related Stories

BN Daybreak: Record FSCA fines; New police bosses; US-China AI rivalries; Trump warns Iran

BizNews Edge: Anglo says goodbye to SA; Old Mutual's gambling warning; Microsoft-Meta AI tension

Anglo American's interims confirm the retreat from South Africa

Mr Market sends Musk “don’t believe you” message after Tesla quarterlies