BHP gives potash $2.6bn vote of confidence

BHP gives potash $2.6bn vote of confidence

It has already invested $ 1.2bn in Jansen and the timing of its entry has been closely watched by the world’s major producers, led by Potash Corp of Saskatchewan, which BHP tried to take over in 2010.

Its $ 39bn bid was blocked by Canada on fears that potash prices and royalties would drop as BHP planned to split from the North American cartel. Now Russia’s Uralkali has given potash producers a taste of what could happen as it recently quit the Belarusian Potash Co cartel.

Tuesday’s announcement came as BHP joined other major miners in reflecting the impact of falling commodity prices in its half-year earnings, which dropped from $ 7.2bn to $ 6.1bn for the first six months of 2013.

However, BHP held up slightly better than its peers as it stepped up output of iron ore, copper, coal and oil and slashed costs in the face of sliding commodity prices.

Major miners have come under pressure to rein in spending, sell off underperfoming assets and tackle debt after years of rampant spending on new mines and acquisitions as commodity prices soared.

BHP put more than $ 40bn worth of new projects on ice a year ago to combat costs that had grown out of control over the previous decade as miners raced to feed booming Chinese demand.

Handing down his first results, Andrew Mackenzie outlined a more aggressive cut in capital and exploration spending than recently flagged, with spending to fall 26pc to $ 16.2 bn in the 2014 financial year.

The company cut $ 2.7bn in operating costs in the 2013 financial year.

Attributable profit excluding one-offs fell to $ 6.12bn for the six months to June from $ 7.18bn a year ago. That was well below analysts’ forecasts of $ 7.16bn.

BHP increased its final dividend by 2 cents to 59 cents, just short of analysts’ forecasts at 60 cents.

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