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Big Banks

Big Miners likened to Big Banks

Nathan Lear
Partner/Private Client Adviser
24 Jun 2013

Recent trends have seen big miners change their emphasis from re-investment and infrastructure spending, to profit retention and share-holder dividends.

Historically, a big portion of the large profits generated by large mining companies have been reinvested into additional exploration, other mining assets and infrastructure; hence their comparatively low shareholder dividends. We have seen mammoth spending by BHP, Rio Tinto and Woodside Petroleum over recent years which is expected to pay off with higher production volume at a lower cost. But it looks as if this is all about to change.

Woodside petroleum recently announced an increase in their dividend payout ratio from 50% to 80% and they expect this ratio adjustment to continue for some years ahead. In making this announcement WPL announced a special dividend payment to shareholders of 63 cents per share or the addition of around 1.8% on their share price. This would take WPL’s current dividend return to 4.8% fully franked – looks just like a bank share dividend.

With the recent sale of its Pinto Valley copper mining operation in Arizona for $630 million, BHP has offloaded peripheral assets to the value of around $US5 billion since last August. This is not a forced sell-off of non-performing assets, it is a planned sell-off of non-core holdings for which BHP has negotiated favourable prices. It is very likely that we will also see BHP increase its payout ratios to shareholders.

Rio Tinto is doing plenty of housework in the wake of previous CEO Tom Albanese’s investment “spending spree” and is also selling off non-core assets including the historic Argyle diamond mine. Rio also expects to raise around $5 billion from asset sales and according to new CEO Sam Walsh, to improve capital disciplines and shareholder returns.

Could this be the beginning of a new era for our big miners, changing from pure cyclical growth assets to long term income and growth assets, similar to a bank?

It looks very likely to me.




Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.