BHP takes major writedowns

Australia’s Broken Hill Proprietary (BHP-N) has written down the value of a large number of its assets.

For the 1998 fiscal year ended May 31, BHP took writedowns totalling US$1.74 billion on a number of the company’s assets around the world, particularly in the copper sector.

BHP discounted the book value of its copper smelter complex near San Manuel, Ariz., which it acquired through its takeover of Magma Copper, by US$388 million. The company also took a writedown of US$543 million on its copper mines in Arizona, also part of the Magma acquisition.

In Peru, BHP took a US$81 million writedown on the Tintaya copper mine. And in Zimbabwe, writedowns on the Hartley platinum project and eight other projects totalling US$223 million were recorded. At Hartley, the company has experienced difficulties with underground conditions.

BHP showed a profit for the year ended May 31, before the writedowns, of US$815 million, a drop of 6% from the previous fiscal year. Including the writedowns, the company posted a loss of US$923 million, compared with a profit of US$257 million a year earlier.

The major’s copper division posted earnings of US$107 million, a decrease of 68.5% from 1997. This was largely due to sharply lower production from the Ok Tedi operation in Papua New Guinea. Drought conditions there had hampered the shipments of concentrates down the Fly River, though production levels were back to normal by April.

Having instituted cost-reduction measures at its mines in North America, BHP managed to reduce 12-month costs by US$40 million.

Income at BHP’s coal division, at US$69 million, was off 33% for the fiscal year, whereas the major’s steel products and ferrous minerals divisions were up 66% and 23%, respectively. BHP also showed a net after-tax gain of US$62 million from the sale of its stake in Fosters beer.