Record prices for nickel, lead and zinc over the past year have underpinned bumper profit reports this week, with BHP Billiton Ltd, Jubilee Mines NL and Independence Group NL all reporting strongly improved results today.
This followed big profit increases reported yesterday by Perth-based mining companies Mincor Resources Ltd and Kagara Zinc Ltd.
By comparison, oil and gas producer Woodside Petroleum Ltd achieved a relatively modest lift in half-year profit, with its reported net profit up 16.3 per cent and its underlying profit up 10.6 per cent.
BHP's nickel division (aka stainless steel materials) was the star contributor to its 28.4 per cent increase in net profit to US$13.4 billion (A$16.7 billion) for the year to June 2007.
The nickel business, which includes the former WMC Resources, achieved a 310 per cent increase in underlying earnings before interest and tax (EBIT) to US$3.69 billion.
BHP's fast-growing iron ore business achieved a modest 7.9 per cent increase in underlying EBIT to US$2.53 billion following big profit gains in 2005-06.
The other notable feature of BHP's profit was the surprisingly small 3.6 per cent increase in operating costs.
"Given the current market tightness, this represents an outstanding performance," the company said.
Jubilee Mines has reported a 67 per cent increase in profit to $173.1 million even though its production volumes declined as it transitioned to new deposits.
Independence Group was another nickel producer to benefit from higher prices, with its net profit up 201 per cent to $105.3 million.
Mincor reported a stunning 246 per cent profit increase yesterday while zinc and copper producer Kagara achieved a 152 per cent increase on higher production volumes and higher commodity prices.
The nickel price peaked briefly at more than US$50,000 per tonne in May and has since tumbled to about US$25,725 per tonne.
However that is still three to four times higher than the prices prevailing just a few years ago.
BHP has a positive outlook on commodity prices generally.
"Over time we expect commodity prices to move towards long run margial costs of supply," the company said in its profit report.
"However given strong demand an dsupply side constraints, this is only likely over the medium term and, in the interim, prices are likely to stay high relative to historical levels, albeit with increased volatility."
