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Australian mining company turns biggest profit in history; investors not happy(Daily Mail (London) (KRT) Via Thomson Dialog NewsEdge) Aug. 24--BHP Billiton racked up the biggest profit in mining history but investors were still not satisfied with the size of its buyback. Shares in the world's biggest miner took a tumble after the Australian company said it would return an extra 1.6 billion to shareholders -- far less than promised by rival Anglo American. It sparked speculation that BHP is piling up a war chest for acquisitions, though chief executive Chip Goodyear warned that targets in the industry were looking pricey. Morgan Stanley mining analyst Wiktor Bielski described the buyback as "a bit of a disappointment." He added: "I suspect they are keeping their powder dry. The question being, of course, for what?" Miners are under pressure to spew out more money to investors or to put the cash to work on acquisitions, as near-record metals prices deliver record cash flow and the stream of new projects slows to a trickle. BHP earned 7.5 billion before tax in the full year, up 58 percent on 2005. Its dividend rose 28 percent to 9.8 pence a share. Chinese growth of 10 pence is driving up metals prices across the board, leading to a golden era. BHP's base metals profits soared 150 pence, helped by record production of copper. Iron ore and nickel output was also at historic highs. Goodyear warned that China's expansion has "peaked" but that growth will still be sufficient to help offset a US slowdown. He said the outlook for metals prices will remain positive for "some considerable time." The environment for takeovers is "tougher" because of the high cost of assets, but the company is still on the lookout, he added. Anglo American has been touted as one possible target, but BHP Billiton is not widely seen as an obvious bidder. One analyst argued that its best acquisition opportunities may lie in oil and gas. There has been speculation that North American aluminium manufacturers Alcoa and Alcan could be targets, but Goodyear said his interest is in the upstream part of that industry. BHP's biggest current headache is a strike at Escondida in Chile, the world's biggest copper mine. A stand-off with workers there has drifted into its third week, and Goodyear declined to predict when it could be resolved. The scale of BHP's profits could spur employees to harden their demands, though the two sides have moved closer together. Nick Hatch of Investec said: "Some stakeholders may feel they are not getting their slice of superprofits." To see more of the Daily Mail and the Financial Mail on Sunday, or to subscribe to the newspaper, go to http://www.thisismoney.com. Copyright (c) 2006, Daily Mail, London Distributed by McClatchy-Tribune Business News. For reprints, email [email protected], call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA. |