The result was enormous, as expected, given elevated commodity pricing. BHP has tripled earnings and cashflows relative to 2018-19 levels.

There’s not a huge amount of point analysing the result. We, and likely every reader, know that BHP has large, long life tier 1 global assets, favourably positioned at the bottom of the cost curve.

The stock is under-priced if commodities stay at this level (because the BHP valuation implies earnings will drop by 30% over the next decade) and expensive if they revert to historical average.

Given difficulties in supply chains, it seems reasonable to expect commodity prices to stay high for the next few moments, at the least, equally, in our minds, it remains a safe bet that China’s demand declines, monetary policy tights, fiscal policy unwinds, consumer demand declines and some of the temporary phenomena (COVID, snarled logistics) goes away.

Netting all that out, and being mindful of the long run decarbonisation story, we continue to hold BHP (and AWC, and IPL) are our primary resource exposures. We are underweight, so that we don’t lose out too badly if those prices remain elevated.

So, I’ll leave it there on the general idea of the result, and just focus on a couple of interesting graphs.

Firstly, the framing of macroeconomic issues. That’s a good chart.

Secondly, the recognition that many years of capex discipline have helped bring about the supply shortfalls.

And that discipline has extended to almost all of BHP’s portfolio.

As it has to really the entire commodities complex. Even oil and gas has held the line.

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