Resources and Mining Report - 19/08/11

Resources and mining companies dominating the headlines this past week during reporting season include Woodside's solid half year results, BHP tipped for record profits, Fortescue profits miss the mark, Santos' profit soars 155 per cent, and Newcrest, Oz Minerals and Onesteel all report. We also hear from ANZ's Commodities Analyst Natalie Robertson, and it's been a choppy week for commodities.

Woodside delivers solid results
Woodside Petroleum Limited (ASX:WPL) delivered solid half year results under its new chief executive, Peter Coleman. Revenue was 7 per cent higher than last year thanks to a rise in commodity prices having a positive impact. The oil and gas producer reported an 8 per cent fall in net profit due to last year's first half being positively impacted by the sale of its Otway Basin asset and lower income taxes. For the six months to June 30 Woodside posted a net profit of $800 million. The results saw Mr Coleman give his first full briefing of the market on his strategy since leaving ExxonMobil. Mr Coleman suggested Woodside may sell stakes in its Browse and Pluto liquefied natural gas ventures to fund the developments as demand rises in Asia.

BHP tipped to post record breaking profits
BHP Billiton Limited (ASX:BHP) has received approval from US regulatory authorities to proceed with its Petrohawk Energy takeover. BHP has bid $US38.75 per share, valuing the target at around $US12.1 billion ($A11.58 billion). The global miner is seeking government approval for a $1-billion plus railway in Queensland between some of its inland coal mines and the coast. The move would threaten coal haulage firm QR National. The mining giant has also approved a $415 million investment to expand mining in Colombia. BHP is tipped to post a record breaking yearly profit of more than $21 billion on Wednesday.

Fortescue profit jumps but misses the mark
Fortescue Metals Group Limited (ASX:FMG) has posted a substantial jump in full year profit. Net profit leapt to just over $US 1 billion, from $US 581 million the year before. Despite the rise, Goldman Sachs had expected the miner to post an even greater profit, closer to $US 2 billion. The miner paid a maiden dividend of three cents in March and will pay a final dividend of four cents, fully franked next month.

Santos profit soars
Santos Limited (ASX:STO) has posted a 155 per cent jump in profit. For the six months to June 30, Santos posted a net profit of $504 million. Revenue increased one per cent to more than $1 billion. Chief Executive David Knox says that while adverse weather conditions in central and Western Australia affected operations in the first half, the company delivered a good operational and financial performance. An interim dividend of 15 cents per share fully franked has been declared.

Newcrest, Oz Minerals and Onesteel report
Newcrest Mining Limited (ASX:NCM) has reported a 63 per cent jump in full-year net profit, coming in at $908 million. The result was boosted by the acquisition of Lihir Gold and the surging price of gold in the 2011 financial year. OZ Minerals Limited (ASX:OZL) first half net profit sank 72 per cent to $113.9 million. The copper and gold miner's result was weighed down by rising costs, declining production, accounting changes and a strong Australian dollar. OneSteel Limited's (ASX:OST) full year net profit has fallen in line with its forecast, down 11 per cent to $230 million. OneSteel refused to provide earnings guidance due to the high level of uncertainty surrounding the factors that impact its earnings.

Resources News
Australia is set to be in a dominant position to supply shale gas to Asia, according to a prominent US energy professor. Rice University's Peter Hartley says massive unconventional shale gas reserves in the Cooper Basin will provide a backfill of gas for Queensland's coal seam methane liquefied natural gas industry. He believes shale gas will reach its peak around 2030, but added that the industry would have to do a better job of reassuring communities that local water supplies will be safeguarded.

Commodities
The ANZ's Commodities Analyst Natalie Robertson says it's been a choppy session for commodities, with gold reaching record highs.

"It's been a risk on, risk off sentiment that's been driving commodity markets this week … Gold and silver have been trading a lot higher and that's because gold is considered the safe haven commodity and silver tends to track gold higher, so those commodities are doing very well."

"On Wednesday and early Thursday gold was more about [being] an inflation hedge, because earlier in the week the US said they weren't going to raise interest rates until mid 2013, so as a result a lot of people bought into gold markets," said Ms Robertson.


- Melissa Beaumont Lee