BHP Group price targets and ratings after impairments and provisions

Key takeaways:

BHP is recognizing a non-cash impairment charge of approximately US$2.5 billion against the carrying value of its Western Australia Nickel business unit.

BHP is taking measures such as reducing operating costs and reviewing capital expenditure plans for the Nickel West and West Musgrave projects.

BHP will recognize an income statement charge of US3.2 billion in relation to the Samarco dam failure.

BHP Brasil, Samarco, and Vale are progressing negotiations towards a settlement of the Federal Public Prosecutor Office Claim and Framework Agreement obligations in Brazil.

There are significant uncertainties surrounding the resolution of the Federal Public Prosecution Office Claim and the Framework Agreement obligations.

Impairment of Western Australia Nickel:

BHP will recognize a non-cash impairment charge of approximately US$2.5 billion against the carrying value of the Western Australia Nickel business unit. This is due to the sharp fall in nickel prices and unfavorable operating conditions in the industry.

Review of Capital Plans:

The impairment of BHP’s Western Australia Nickel operations is due to a significant decrease in nickel prices, which have been impacted by increased supply from Indonesia and changes in industry dynamics. These developments have prompted BHP to take measures such as reducing operating costs and reviewing capital expenditure plans for the Nickel West and West Musgrave projects. The Kambalda concentrator, part of the Nickel West operations, will be placed into care and maintenance in June 2024, following the suspension of key ore feed mines.

Samarco Dam Failure Provision:

BHP will recognize an income statement charge of US3.2 billion in relation to the Samarco dam failure. BHP Brasil′s provision for the Samarco dam failure will be US6.5 billion as of December 31, 2023. The resolution of the Federal Public Prosecution Office Claim and Framework Agreement obligations remains uncertain.

Negotiations for Settlement:

BHP Brasil, Samarco, and Vale are progressing negotiations towards a settlement of the Federal Public Prosecutor Office Claim and Framework Agreement obligations in Brazil. The Renova Foundation has made good progress on reparation and compensation programs for the impacted community.

Uncertainties:

There are significant uncertainties surrounding the resolution of the Federal Public Prosecution Office Claim and the Framework Agreement obligations. Key areas of uncertainty include the scope and cost of completing the programs, outcomes of appeals, terms of potential settlement agreements, and the extent to which Samarco can fund future obligations.

Stock Analyst ratings: BHP Group (ASX)

Based on 15 Wall Street analysts offering 12-month price targets for BHP Group Ltd in the last 3 months. The average price target is A$48.88 with a high forecast of A$84.43 and a low forecast of A$25.00. The average price target represents a 6.37% change from the last price of A$45.95.