World’s Largest Miners Pledge Net Zero Carbon Emissions by 2050

“ICMM members’ collective commitment to net zero scope one (direct) and two (indirect) greenhouse gas emissions by 2050 is a pivotal moment in our history,” CEO Rohitesh Dhawan said in an open letter signed by the 28 chiefs of the world’s largest miners.ang

The announcement comes before next month’s U.N. climate gathering that aims to achieve more ambitious climate action from the nearly 200 countries that signed the 2015 Paris Agreement to limit global warming.

Many miners including Anglo American, Rio Tinto and BHP, under pressure from environmental activists and shareholders, have already committed to net zero by 2050 in direct and indirect emissions.

The collective commitment, however, “represents a joint ambition from companies that make up one third of the global mining and metals industry,” the ICMM said.

Its 28 members span 650 sites over 50 countries.

Direct and indirect emissions will be lowered by accelerating the use of renewable energy and reducing or eliminating the use of diesel trucks, Dhawan told Reuters.

Companies will report on their progress annually, the ICMM said.

Targets for scope three emissions, which includes those from customers processing iron ore to steel, should be set “if not by the end of 2023, as soon as possible.”

The technology to produce carbon-free steel has not yet been proven.

Glencore, the world’s largest supplier of seaborne thermal coal, has committed to a scope three goal mainly by starving its coal mines of fresh capital.

ICMM members, which include Barrick Gold and Alcoa, have collectively cut emissions by 6% between 2016-2018, Dhawan said.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Zandi Shabalala and Clara Denina; Editing by Cynthia Osterman)

European Stocks Edge Higher After Data, Virus Worries Linger

The pan-European STOXX 600 was 0.1% higher, after the index marked its longest winning streak in over a decade.

Tighter scrutiny of China’s internet sector, a nationwide lockdown in New Zealand and movement restrictions in several Asian countries kept investors on edge even as European economies continued to recover from pandemic lows.

The travel and leisure sector fell 1.0%, with holiday company TUI Group and British Airways owner IAG leading declines.

“Travel stocks are experiencing yet another day of turbulence, with questions over travel regulations serving to highlight the uncertain road ahead,” Joshua Mahony, senior market analyst at IG, wrote in a client note.

Dutch tech firm Prosus, which has a stake in Chinese tech giant Tencent, fell 3.2%.

Economically sensitive sectors such as oil and gas, automakers and banks also retreated.

Data showed the euro zone economy grew 2% in the second quarter, confirming its earlier reading as the relaxation of coronavirus restrictions spurred economic activity after a brief recession.

“The strong growth in euro zone GDP in Q2 is likely to be repeated in Q3 despite the spread of the Delta variant, and should bring the economy back towards its pre-virus size in the coming months,” said Jessica Hinds, Europe economist at Capital Economics.

“But the southern economies continue to lag, with travel restrictions still holding back their tourism sectors.”

A rally in hard-hit cyclical stocks helped European shares hit all-time highs last week as expectations of a record jump in European corporate profit and optimism around the pace of vaccinations underpinned the continent’s economic recovery prospects.

However, a monthly survey of fund managers by Bank of America showed only less than half of the respondents now expect the European economy to further improve over the next 12 months – the lowest proportion since last June.

UK-listed shares of BHP Group gained 3.4.4% after the world’s biggest miner posted its best annual profit in nearly a decade and said it would pay a record dividend.

Online trading platform Plus500 jumped 5.1.1% as it forecast annual revenue to be “significantly ahead” of analysts’ estimates.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Sruthi Shankar and Shreyashi Sanyal in Bengaluru; Editing by Saumyadeb Chakrabarty, Subhranshu Sahu and Mark Heinrich)

BHP Shares Gain on Strong Profit and Record Dividend; Target Price GBX 2,560

BHP Group, one of the largest diversified natural resource companies in the world, delivered a strong profit in the first half of the 2021 financial year and declared record half-year dividend of $1.01 per share and ROCE up to 24%, helping its shares soar over 5% on Monday.

The Anglo-Australian multinational mining, metals and petroleum dual-listed public company said its profit from operations rose 17% to $9.8 billion, up. Attributable profit came in at $3.9 billion, which included an exceptional loss of $2.2 billion predominantly related to the impairments of New South Wales Energy Coal and associated deferred tax assets, and Cerrejón.

The world’s largest listed miner said its underlying attributable profit rose 16% to $6.0 billion.

The London-listed BHP‘s shares, which surged over 8% in 2020, had risen about 16% so far this year. The stock closed 5.22% higher at GBX 2,228 on Monday.

“Our analysis shows that the fair value estimate for BHP is between a bear case of GBX 1,200 per share and a bull case of GBX 2,950 per share, leading to our high fair value uncertainty rating,” said Mathew Hodge, director at Morningstar.

“The bulk of our BHP Billiton fair value estimate derives from just three commodities: iron ore, copper, and petroleum, in broadly equal contributions of approximately one third apiece. Coking coal is a minor contributor.  As commodity prices tend to move in unison, our valuation scenario uses high, low, and baseline prices. We don’t split individual commodities out.  Our price scenarios also factor in currency, operating, and capital cost adjustments.”

The dual-listed company forecasts to make an investment decision soon on its $5.3-$5.7 billion Jansen potash project in Canada and the Scarborough natural gas project off Western Australia, in which BHP will invest $1.4-1.9 billion, Reuters reported.

BHP Stock Price Forecast

Fourteen analysts who offered stock ratings for BHP in the last three months forecast the average price in 12 months of GBX 2,146.43 with a high forecast of GBX 2,560 and a low forecast of GBX 1,610.

The average price target represents a -3.66% decrease from the last price of GBX 2,228. From those 14 analysts, seven rated “Buy”, six rated “Hold”, one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of GBX1,950 with a high of GBX4,380 under a bull scenario and GBX680 under the worst-case scenario. The firm gave an “Overweight” rating on the natural resource company’s stock.

“We value BHP based on a simple average of our EV/EBITDA and P/NAV methodologies. This allows us to reflect both the shorter-term earnings power and longer-term value of the company. We apply an EV/EBITDA multiple of 6.7x, in line with its historical average. We apply a 1.0x multiple to our NPV estimate, which is based on a blended WACC of 9% and terminal growth rate of 2.0% from 2035,” said Alain Gabriel, equity analyst at Morgan Stanley.

Several other analysts have also upgraded the stock outlook. Citigroup raised the price target to GBX 2,100 from GBX 2,000. Berenberg initiated the coverage with hold rating and GBX 2,000 price target. Credit Suisse cuts to neutral from outperform; raises target price to GBX 2,100 from GBX 1,900.

In addition, UBS upped the target price to GBX 2,200 from GBX 2100. Independent Research increased the target price to GBX 2,100 from GBX 1,660 and rated hold. RBC cuts target price to GBX 2,500 from GBX 2,600. Liberum cuts price target to GBX 1,880 from GBX 2,400.

Analyst Comments

BHP declared a solid dividend of USc101/sh, exceeding our and cons. estimates of USc84-85/sh. Underlying EBITDA was in-line with cons. and within 1% of MSe but EPS missed by 2-5% on higher depreciation. Net Debt was broadly in-line and opex guidance was unchanged but is still based on favourable FX,” Morgan Stanley’s Gabriel added.

BHP‘s portfolio mix and quality stand out among peers. The low-cost position of its assets enables the company to generate FCF yield even in a stress scenario. It maintains a strong B/S, giving flexibility to pursue growth and/or increase cash shareholder returns, in particular given the company’s net debt target of US$12-17bn (post IFRS16 adjustment) vs FY20 levels of US$12.5bn. Spot FCF yields are comparable to peers, even without contributions from the Petroleum division, thus implying long-term optionality to a potential oil price recovery. We prefer BHP on a relative basis, given its attractive commodity mix ex-Iron Ore and free optionality on a potential oil price recovery.”

Upside and Downside Risks

Risks to Upside: Growth projects (Jansen potash, Escondida growth, Spence hypogene, Olympic Dam) successfully executed. Better operating performance, lower costs and capital expenditure. Higher commodity prices – highlighted by Morgan Stanley.

Risks to Downside: Execution issues at growth projects (Jansen potash, Escondida growth, Spence hypogene, Olympic Dam). Weak operating performance, higher costs and capital expenditure. Lower commodity prices.

Check out FX Empire’s earnings calendar

BHP to Acquire Additional 28% Stake in Shenzi Oil Field for $505 Million; Target Price GBX 1855

BHP Group, one of the largest diversified natural resource companies in the world, said on Tuesday that it has signed a sale agreement with Hess Corp to acquire an additional 28% stake in Shenzi oil and gas field in the Gulf of Mexico for $505 million.

The deal would bring BHP’s ownership to 72% and immediately add approximately 11,000 barrels of oil equivalent per day of production. The effective date of the transaction is July 1, 2020 with an expected close by December 2020.

“We forecast oil production of 99 million BoE for FY21 compared to company guidance of 95-102 million BoE and the acquisition of the additional stake in Shenzi would increase our base case production to 102 million BoE,” said Alain Gabriel, equity analyst at Morgan Stanley.

“The transaction’s rationale, according to the statement, is to target counter-cyclical acquisitions in high-quality assets that are (or near) production stage and that provide upside optionality to a price recovery at a low-point in the cycle.”

BHP Group’s shares traded 1.46% lower at GBX 1628.4 on Tuesday, the stock is down about 8% so far this year.

BHP Group stock forecast

Eleven analysts forecast the average price in 12 months at 1,855p with a high forecast of 2,200p and a low forecast of 1,650p. The average price target represents a 13.82% increase from the last price of 1,629.80p. From those 11, nine analysts rated “Buy”, two rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley target price is GBX 1,700 with a high of GBX 2,800 under a bull scenario and GBX 690 under the worst-case scenario. BHP Group has been assigned a GBX 1,800 price target by research analysts at Credit Suisse Group. The brokerage presently has a “buy” rating on the stock.

Other equity analysts also recently updated their stock outlook. Deutsche Bank restated a “buy” rating and issued a GBX 1,650 price target on shares of BHP Group. JP Morgan reiterated an “overweight” rating. Royal Bank of Canada lowered their price objective to GBX 1,900 from GBX 1,950 and set an “outperform” rating. Goldman Sachs Group lifted their price objective to GBX 1,850 from GBX 1,780 and gave the stock a “buy” rating.

Analyst view

“BHP’s portfolio mix and quality stand out among peers. The low-cost position of its assets enables the company to generate FCF yield even in a stress scenario. It maintains a strong B/S, giving the flexibility to pursue growth and/or increase cash shareholder returns, in particular given the company’s net debt target of $12-17 billion (post-IFRS16 adjustment) vs 1HFY20 levels of $12.5 billion,” Morgan Stanley’s Gabriel added.

“Spot FCF yields are comparable to peers, even without contributions from the Petroleum division, thus implying long-term optionality to a potential oil price recovery. We prefer BHP on a relative basis, given its attractive commodity mix ex-Iron Ore and free optionality on a potential oil price recovery.”

Upside and Downside risks

Upside: 1) Growth projects (Jansen potash, Escondida growth, Spence hypogene, Olympic Dam) successfully executed. 2) Better operating performance, lower costs and capital expenditure. 3) Higher commodity prices – highlighted by Morgan Stanley.

Downside: 1) Execution issues at growth projects (Jansen potash, Escondida growth, Spence hypogene, Olympic Dam). 2) Weak operating performance, higher costs and capital expenditure. 3) Lower commodity prices.

BHP Posts 4% Decline in Annual Profit Amid COVID-19 Slowdown; Warns Slow Growth Recovery Outside China

BHP Group, an Anglo-Australian multinational mining, metals and petroleum dual-listed public company, reported a decline in annual profit of nearly 4% to $9.06 billion in the second quarter and said except China, all other major economies will contract this year as a result of the COVID-19 pandemic.

The largest diversified natural resource company reported an attributable profit of $8.0 billion and underlying attributable profit of $9.1 billion broadly in line with the prior year. The company posted a profit from operations of $14.4 billion and underlying EBITDA of $22.1 billion at a margin of 53%, with unit costs reduced by 9%.

BHP Group also declared a final dividend of 55 cents per share, down from 78 cents a year earlier, or US$2.8 billion, which includes an additional amount of 17 US cents per share (equivalent to US$0.9 billion) above the 50% minimum payout policy. Total dividends announced US$1.20 per share, equivalent to a 67% payout ratio.

BHP Group expects that China and the OECD will return to their pre-COVID-19 trend growth rates from around 2023. Developing economies outside East Asia may take longer. Inflation trends and exchange rates have been volatile.

Executive comments

“We expect most major economies will contract heavily in 2020, China being the exception. Recovery will vary considerably by country. Our diversified portfolio and high-quality assets position us to continue to generate returns in the face of near-term uncertainty, even as we secure and create the options in future-facing commodities that will allow us to sustainably grow value in the long-term,” Chief Executive Mike Henry said in a statement.

“BHP’s operations generated robust free cash flow and our balance sheet remained strong, with net debt finishing the year at the low end of our target range. We have announced a final dividend of 55 US cents per share, bringing shareholder returns to US$6.1 billion for the full year,” Henry added.

BHP Group stock forecast

Eleven analysts forecast the average price in 12 months at GBX 1,820 with a high forecast of GBX 2,130 and a low forecast of GBX 1,450. The average price target represents a -1.15% decrease from the last price of GBX 1,841.20. From those 11, seven analysts rated “Buy”, four rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley target price is GBX 1,680 with a high of GBX 2,450 under a bull scenario and GBX 720 under the worst-case scenario. BHP Group had its price objective lowered by analysts at Royal Bank of Canada to GBX 1,900 from GBX 1,950. The firm currently has an “outperform” rating on the stock.

Other equity analysts also recently updated their stock outlook. UBS Group upped their price objective to GBX 1,850 from GBX 1,700 and gave the company a “buy” rating. Goldman Sachs Group upped their price target to GBX 1,850 from GBX 1,780 and gave the company a “buy” rating. Bank of America raised shares of BHP Group to a “buy” rating and set a GBX 2,050 target price.

Analyst view

“BHP’s portfolio mix and quality stand out among peers. The low-cost position of its assets enables the company to generate FCF yield even in a stress scenario. It maintains a strong B/S, giving the flexibility to pursue growth and/or increase cash shareholder returns, in particular given the company’s net debt target of $12-17 billion (post-IFRS16 adjustment) vs 1HFY20 levels of $12.5 billion,” said Alain Gabriel, equity analyst at Morgan Stanley.

“Spot FCF yields are comparable to peers, even without contributions from the Petroleum division, thus implying long-term optionality to a potential oil price recovery. We prefer BHP on a relative basis, given its attractive commodity mix ex-Iron Ore and free optionality on a potential oil price recovery,” Gabriel added.

Upside and Downside risks

Upside: 1) Growth projects (Jansen potash, Escondida growth, Spence hypogene, Olympic Dam) successfully executed. 2) Better operating performance, lower costs and capital expenditure. 3) Higher commodity prices – highlighted by Morgan Stanley.

Downside: 1) Execution issues at growth projects (Jansen potash, Escondida growth, Spence hypogene, Olympic Dam). 2) Weak operating performance, higher costs and capital expenditure. 3) Lower commodity prices.