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BHP’s business has been resilient to the crisis so far, with the miner reporting on March 19 there had been ”no material impacts on our operations or supply chains”.
Although shares in the miner have fallen more than 36 per cent because of its exposure to weak oil and copper markets, its iron ore and coking coal divisions have been among the few industries to benefit from higher prices on the back of virus-related transport restrictions in China.
Almost 55 per cent of BHP’s revenue was generated from sales to China last year and BHP chief Mike Henry said China seemed to be emerging from the industrial hibernation forced by the virus.
”Encouragingly, there is increased activity in China as regions are ramping up production with strong government support,” he said on March 19.
Iron ore delivered 70 per cent of BHP’s earnings over the past six months. As long as the iron ore price stays strong (it was $US87.98 a tonne on Monday) BHP’s cash flows will be remain solid, and the company has low debt.
Chairman Ken Mackenzie said BHP may capitalise on its strong balance sheet by buying amid the market rout.
The introduction of 14-day quarantine periods on people crossing Australian state and territory borders will cause complications for BHP’s fly-in fly-out workforce, but mine workers are exempt in Western Australia, where BHP has the biggest reliance on FIFO labour.
In a bid to support its suppliers and the communities near its mines, BHP pledged last week to immediately pay the $100 million of invoices it had on hand.
The company said it also would slash payment times for small business from 30 days to seven days, in the hope it would help the liquidity of its small suppliers.
The miner seeks to employ an extra 1500 workers on six-month contracts to help its remote operations get through the virus peak.
On Monday, BHP announced a $50 million fund for boosting health services in the communities near its Australian mines.