Berenberg lowers target price on BHP

Analysts at Berenberg lowered their target price on mining giant BHP from 2,100.0p to 2,000.0p on Friday after the firm provided the market with clarity on the futures of its West Australian nickel business.

Berenberg, which stood by its 'hold' rating on the stock, noted that BHP's nickel business had been in focus due to its negative underlying earnings and free cash-flow performances - a function of weak nickel prices due to Indonesian oversupply and weak demand due to delays in the energy.

"Following an asset review, BHP will transition the operations to care and maintenance from July 2024, suspend operations from October 2024 and move to full care and maintenance by December 2024," noted Berenberg.

BHP has flagged that the nickel business will report an underlying loss of roughly $300.0m in FY24, better than the German bank's forecast $356.0m loss, and that it will take a $300.0m pre-tax impairment on the asset. BHP also guided to care and maintenance costs of approximately $300.0m per year, which includes exploration and take effect from January 2025.

"We update our model to incorporate the nickel operations being placed on care and maintenance, push out West Musgrave to commence operations in H2 CY28 and roll forward our NAV to FY25. The impact is a small increase to our future estimates given our expectation that the operations were loss-making," said Berenberg. "The stock is trading on 1.3x NAV and 5.4x EBITDA."

As of 0930 BST, Molten Ventures shares were down 1.11% at 385.17p.

Reporting by Iain Gilbert at Sharecast.com