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The world’s biggest mining company welcomes inflation: BHP profit jumped 61%

BHP reported strong results across all its business units. Record prices for commodities helped to drive the group’s pre-tax profit up by a jaw-dropping 61%.

The BHP Group PLC (SA), the world’s leading mining giants and resources company, reported its first half of FY 22 earnings on Tuesday.
Even through its most important export business—iron ore has experienced a roller-coaster price journey during the second half of 2021, BHP still reported a strong result across all business units. Record prices for coking coal and copper prices also helped to drive the group’s pre-tax profit up by a jaw-dropping 61%.

Key summary from the report

In terms of the outlook for the upcoming quarters, BHP was upbeat about the future demand and confidence that the headwinds from China--- the company’s biggest customer– were expected to ease in the year ahead.

Share price Technical Analysis

Market participants responded warmly to BHP’s impressive financial results and pushed the share price up by more than 2% in the early morning while the broadly sour momentum among ASX traders dragged the price down to red zone after mid-day trading.

Overall BHP share price continues to move up for the past four weeks and has been 20% up from the start of the year. The current upward moving trajectory remains at play and could send the price to its last May high at $51.7 in days before challenging the yearly rooftop above $53. Both ascending RSI trend line and the rising trading volume are in favour of bulls from the weekly chart.

From a near-term perspective, a price gap between $48.99 and $51.12 left on August 18 in 2021 was expected to be filled and fixed before the price edging toward $51 and above. On the other hand, another gap below and between $47.5 and $48.25 will exercise as a support for the price for the selling pressure. 20 days moving average (around $46.9 at the moment) will be the next support level to keep an eye on.

Rio Tinto

Another Australian mining giant, Rio Tinto PLC is the world's second-largest metals and mining corporation, behind BHP, and produces iron ore, copper, diamonds, gold and uranium. Rio Tinto will report its first half earnings on February 23.

What to expect?

Like BHP, Rio Tinto is expected to report a strong result for FY21.

Benefiting from the rising commodity prices under the inflationary environment, RIO is estimated to deliver a 48% increase in underlying EBITDA in calendar 2021, compared to 2020, according to Macquarie.

Iron ore makes up around 73% of Rio Tinto’s group earnings. Although recent fourth-quarter result shows that Rio Tinto’s 2021 iron ore production was down 4%, the price for the key steel-making material has jumped more than 50% in the past three months. Apart from that, Rio Tinto’s exposure to aluminium and copper - both recorded their decade-high recently - are also tipped to bolster the Australian mining giant’s profit growth.

Share price Technical Analysis

Since the start of 2022, Rio Tinto shares have gone up by around 23%. The uptrend looks likely to continue from a technical point of view.

The daily candlestick of Rio Tinto has printed a “U-shape” or “Bowl-shape” of rebound from last November’s dip and skewed to the upward moving channel. The price momentum stays in favour of bull as 20, 50 and 100 days’ moving averages are all some distance below in spite of today’s pull back. The price gap between $122 and $126 is the most noteworthy level of technical resistance at the moment. Once broken through, the price level $129 should be in view and mark a six-month-high for the Australian mining leader.

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This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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