BHP defends dividend policy, launches Samarco probe

BHP's dividend vulnerable to changes: Investor

Mining giant BHP Billiton on Thursday defended its progressive dividend policy even as share prices and profits slump this year amid slowing growth in China and a recent mine disaster in Brazil.

Describing 2015 as the "most difficult in our 130 years", BHP chairman Jacques Nasser said at BHP's annual general meeting in Perth that the dividend policy—which aims to steadily increase or at least maintain the dividend per share at each financial year—is the outcome of "appropriate capital management".

He added that maintaining a solid "A"-rated balance sheet was BHP's top priority and that its dividend policy has serviced shareholders well.

"As an industry we are dealing with global tensions; the challenges of climate change; steep falls in commodity prices and reshaping our operations and portfolios to deal with a new reality," added Nasser.

Although he was "disappointed" with BHP's share price, which has fallen over a third year-to-date, he noted that the resources business is a cyclical one.

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"It's quite ironic given that they've maintained their progressive dividend policy which has no factors in there with regards to cyclicality," said Rob Brierley, head of research at Paterson Securities on Nasser's comments.

Speaking to CNBC's Street Signs, Nasser he said that BHP needs to arrest its earnings slide.

"They can survive this for a year or maybe even 18 months but the reality is that you don't want to be spending more than what you are making which is essentially what they are doing with dividend policy as it stands today," added Brierley.

At the AGM, BHP executives spent a considerable amount of time expressing regret about the disaster at Samarco where two dams burst earlier this month, killing 11. Eight persons are still missing.

BHP and joint venture partner Vale SA will be commissioning an external investigation into the dam spill, said Nasser.

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Describing BHP's response to the disaster as "interesting" and "guarded", Patersons' Brierley said damages are likely to be in the billions of dollars.

"I've noticed today that they're very keen on saying sorry and they're very keen on finding out what went on but they're stopping short of taking responsibility directly and they're saying it really all falls back on Samarco," said Brierley.

BHP has cancelled corporate year-end functions in its Australian iron ore and coal operations following the disaster, the company said in an email.

"Given the recent tragic events at the Samarco operations in Brazil, we have decided it would not be appropriate to continue with the end of year functions," a statement at its Perth and Pilbara iron-ore operations reads.