Monsters of Rock: BHP's record result papers over the cracks as market gets high on dividends

BHP’s record day powers materials to 1.66% gain
Mt Gibson Iron falls after deadly combo of fire and non-cash impairment

It’s earnings season on the ASX and BHP’s (ASX:BHP) stupidly big profit and dividend payout has papered over some serious cracks.

The US$30.9b net profit (US$23.8b underlying) and more importantly the larger than expected US$1.75/share dividend payout lit a fire under investors in the world’s biggest miner, which climbed 4.09%.

Given BHP makes up around 10% of the ASX 200, that was bound to boost the local bourse, with the hallmark index up 0.58% and the materials sector hopping to a 1.66% gain.

In reality, the market was hitched on BHP’s iron ore lined coat-tails.

Fortescue Metals Group (ASX:FMG) was up 1.46% as well, with BHP’s big payday potentially leaving investors buoyed before its earnings report later this month.

Rio Tinto (ASX:RIO) had previously doused expectations for the sector after cutting its dividend to a minimum 50% payout.

BHP had been expected to drop its payout ratio to as low as 65%, but delivered 77% of earnings back to shareholders.

Other companies on a high in the mining space included coal miners Yancoal (ASX:YAL) and Stanmore (ASX:SMR).

Rio pulled itself into the green as well, with copper miners OZ (ASX:OZL) of BHP bid fame and Sandfire Resources (ASX:SFR) also funding support.

But there was a whole lot of red elsewhere in iron ore, lithium and gold, as China’s weak economic data weighed on the market. For today BHP’s Good Vibrations are hitting like the drugs Brian Wilson took so he could forget Mike Love plastered his band’s name on Kokomo.

Whether those vibes last long will be a question of time.

Monstars share prices today:

Fire in the hole

Well not quite, more like the screening plant at Mt Gibson Iron’s (ASX:MGX) Koolan Island mine.

Processing at Koolan Island has been suspended since the fire was started and promptly put out by the site’s emergency response team on Friday.

There are stockpiles of the mine’s rich 65% Fe material to keep MGX going for a while. It is planning to ship at 40% of plant capacity from late August while the damage is assessed.

“The fire within the Koolan Island process screening plant circuit will temporarily slow the site’s operational and financial improvement trajectory but is recoverable,” the company said.

“With the improvements already realised to date, the mining of high grade ore continues to increase with the waste-to-ore stripping ratio declining as scheduled, and the site will be well positioned to recover the deferred shipments once processing capacity returns to planned levels.”

In probably worse news MGX says lower iron ore prices will likely prompt it to record a non-cash impairment of around $150m before tax on the value of non-current assets in the Koolan Island business unit.

That would come on top of a $37m write down over its suspended Shine mine for the December 2021 half.