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23 August 2012 | Adam Leach
Annual profit at the world’s largest mining firm, BHP Billiton dropped by 34.8 per cent due to the turbulent economic conditions and reduced demand for commodities from China.
The company’s 2011/12 full-year results, revealed the business had been hit hard by copper prices falling by 14 per cent over the past year, and by 25 per cent over the past 18 months. The drop in copper prices contributed to the company’s pre-tax profits within its base metals division declining by $841 million (£530 million).
For the company as a whole, profit dropped by 34.8 per cent to $15.4 billion (£9.7 billion). For the year ahead, it expects volatility in commodity pricing to continue. “In the short term, we expect volatility to persist as temporary weakness in the manufacturing and construction sectors across all key markets is expected to weigh on market sentiment.”
But the company expects demand from China to increase in the longer term, which it believes will raise steel and iron ore prices. The commodities it predicts an uncertain future for are those where the barriers to entry to the market are high, where extraction requires significant investment in infrastructure for example, such as potash.
It also predicts an uncertain future for copper, as global supply of the metal continues to decline but demand stays strong. In a separate announcement yesterday, the company confirmed it is to delay work on its Olympic Dam copper project in South Australia. The project, which would be the world’s biggest copper and uranium mine, is being shelved while the company investigates ways to make it less expensive.