BHP Group Faces Scrutiny on Two Fronts
BHP Group Ltd (ASX: BHP) has recently faced some controversy over projects in Western Australia which could destroy sacred Aboriginal sites. Multi-billion-dollar projects are currently on hold, pending further talks with the Banjima people. In light of macroeconomic events, namely the worldwide protests following the death of George Floyd, the mining giant would do well to proceed carefully. A recent government plan to fast track development now creates further urgency concerning the situation. This is not their only recent concern, with the company receiving scrutiny over industrial practices affecting residential properties.
South Flank is an AUD5.2 billion-dollar iron ore development site which is due to start producing ore in 2021. BHP confirmed that it had been approved to start work at South Flank, an area which includes 40 Aboriginal heritage sites. Permission has been granted by Western Australian Treasurer and Aboriginal Affairs Minister Ben Wyatt under the premise that mining would create wealth, which will have positive economic and social impacts on the traditional landowners.
There have been calls for Mr Wyatt’s resignation through protests in front of Rio Tinto’s (ASX: RIO) Perth headquarters, where a conflict of interest in Mr Wyatt’s dual position has been cited as a concern. This protest took place after the destruction of the Juukan George sacred site by RIO, which is a clear litmus test for how BHP should proceed; or else face the wrath of the Australian public in the context of the macroeconomic environment of heightened social movements.
This land rights issue comes right as an AUD200 million bill landed on BHP’s desk, along with some other iron producers, as dust from operations in Port Hedland has affected hundreds of homeowners who are now looking to be bought out as compensation. WA government announced that homeowners in Port Hedland’s West End would receive a 35 per cent premium on the market value of their properties, and an additional AUD20,000 to cover the cost of moving as the buyout may take up to three years to be completed.
439 residential dwellings have been affected, and unfortunately, as BHP is the biggest exporter, they are expected to fund most of the buyback. However, investors must wait on how negotiations go between the government, Fortescue Metals Group and Roy Hill, who are the stakeholders involved in the industrial incident.
More recently however, Prime Minister, Scott Morrison has announced an AUD72 billion-dollar infrastructure project to fast track developments which will include BHP. 15 major projects are being supported by the stimulus which will support 66,000 jobs. This will help BHP’s Olympic Park expansion project in South Australia which will, in turn, support growth throughout the company. Looking at BHP’s fundamentals, it is a stable business with revenues increasing over the last three years. However, during this time of global unrest concerning social issues of inequality, as well as industrial accidents, investors would be wise to move cautiously in how they invest in BHP despite the government infrastructure plan.
By Caroline Wong
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