BHP beats forecasts, remains cautious on China demand

Top global miner BHP Billiton signalled caution over a sustained global recovery and held off from a share buyback after reporting its weakest first-half profit in four years.

BHP's July-December profit nevertheless beat market forecasts and was 24 per cent stronger than in the previous half, spurring the miner to raise its dividend slightly, pushing its shares up more than three per cent.

"The momentum's the important factor," said Tim Schroeders, a portfolio manager at Pengana Capital, which owns BHP shares.

"There should be some more good news over the next few months with prices for iron ore and coal appearing as though they'll go up, which should further buoy profits going forward."

Fund managers said BHP was wise to hold on to its cash instead of launching a share buyback, which analysts had flagged might be possible, as the global outlook remained uncertain and it had $12 billion (Dh44bn) worth of expansion projects underway.

"With such a large number of reinvestment opportunities, they're just going to play the conservative angle until they gain more confidence in the global economic recovery," said Adam Dixon, a portfolio manager at Ausbil Dexia.

BHP warned the pace of monetary tightening and the rate of loan growth for commodity-intensive sectors in China, its biggest customer, would be critical, and was wary about the speed and strength of recovery in developed economies.

"We do not expect China to stop lending," BHP said. "However, reduced credit liquidity in key segments of the commodity market may have a flow-on impact on prices."

At the same time, CEO Marius Kloppers highlighted China's roaring demand for iron ore, which has driven up spot prices to more than double the benchmark price.

He played down speculation about potential takeovers, saying the focus was its proposed $116bn iron ore production joint venture with Rio Tinto.

China to try Rio Tinto staff on bribery charges

China has indicted four employees of Anglo-Australian mining giant Rio Tinto on charges of bribery and violating commercial secrets, opening the way to a trial in a case which has tested Sino-Australian relations.

The four include Australian citizen Stern Hu, state news agency Xinhua said.

Hu, Rio Tinto's lead iron ore negotiator in China, and three other staff from China were arrested last July and remain in detention in a commercial secrets case that was referred to a prosecutor last month.

The case placed a cloud over already contentious iron ore price negotiations between China and Rio, fellow Australian miner BHP Billiton and Brazil's Vale as well as government-to-government ties.

China is Australia's biggest trade partner at $53 billion (Dh194.67bn) last year. Australia exported $15bn worth of iron ore to China in 2008.

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