BHP Group is arguably the most well diversified mining and exploration company there is, and it is a part of every investor’s portfolio for different reasons – maybe for the stable dividends, or to decrease the overall volatility of the portfolio. BHP shares are also one of the best blue chip stocks that trade on the ASX. BHP derives revenues from 4 main commodities – Iron Ore, Copper, Coal, and Petroleum. These commodities are very sensitive to the global economic outlook and activity. With economic activity increasing across the developed world, increased demand and inflation fears have resulted in high commodity prices. BHP shares are trading close to its highs posted earlier this year on the back of soaring iron ore prices.
On the back of sky high commodity prices, BHP’s profits will most likely soar once again for full year FY21, just as it did in the half year earnings, resulting in a very healthy dividend payout once again – making BHP shares one of the best income stocks on the ASX. Today, BHP shares are in focus for another reason
BHP is known to be looking into divesting from the Oil and Gas business in a multi-billion dollar exit. As reported extensively during US market hours yesterday, BHP is looking to accelerate its retreat from fossil fuels. Bloomberg first broke the story yesterday and mentioned that BHP is looking for a trade sale to dispose of its petroleum assets in a bid to not be stuck with assets that may become difficult to sell later on, as the world moves away from fossil fuels and towards green energy.
The sources at this moment in time have asked to not be identified and no decision has yet been taken regarding the matter. There is considerable pressure being mounted on mining companies to reduce their carbon footprint. We first saw Fortescue Metals Group (ASX: FMG) reveal its plans for green hydrogen and now, the BHP, the world’s biggest miner’s potential exit from fossil fuels bodes well for the entire mining industry.
Yesterday, BHP also announced their latest quarter results. Petroleum production for the 2021 financial year was slightly above guidance. Full year production guidance for copper, iron ore, metallurgical coal and nickel were delivered,as was revised guidance for energy coal.
As ESG reporting and concerns mount, it is now crucial for companies to align themselves towards achieving net zero emissions or reducing their carbon footprint. BHP has a goal to “support industry to develop technologies and pathways capable of 30% emissions intensity reduction in integrated steelmaking, with widespread adoption expected post 2030.” The company also supports a “40% emissions intensity reduction of BHP-chartered shipping” of its products.
We’ll have to wait and see how the divestment from Oil and Gas pans out, however, BHP shares are thus in focus for the rest of the week given the significance of the story.
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