With net debt of only $US6.1 billion, BHP has been able to declare a record interim dividend of $US1.50 a share that will absorb $US7.6 billion of its cash in a continuation of the $US22 billion cash bonanza its shareholders will have experienced in the past year and a half.

The multibillion-dollar question is whether BHP can sustain the pace set in the December half, with the pandemic still a source of disruption and costs and China’s economy slowing quite dramatically.

The latest result was swollen by price increases for all its major commodities, with iron ore prices up 9 per cent, copper and nickel 30 per cent, metallurgical and thermal coal up almost 200 per cent and oil prices nearly 80 per cent.

If anything the overall pricing environment is even more robust amid a tightening global commodities and energy supply environment.

Iron ore, BHP’s key commodity, isn’t trading at last year’s peaks but at around $US150 a tonne is way above the December half average of about $US113 a tonne.

The multibillion-dollar question is whether BHP can sustain the pace set in the December half, with the pandemic still a source of disruption and costs and China’s economy slowing quite dramatically.

Iron ore is the commodity most impacted by China’s economy, which has slowed markedly as a result of its property sector’s woes, the impact on confidence and activity of its crackdowns on its more entrepreneurial companies and its authorities’ zero tolerance approach to COVID.

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With China responding to the slowdown with its lever of first resort – measures to stimulate investment in infrastructure, property and plants – there ought, however, to be a floor under the iron ore price at relatively high levels for at least the remainder of this year.

Oil prices are at their highest since 2014 and closing in on $US100 a barrel amid the escalating tensions around Ukraine. Coal prices soared in the half, driving the division’s result from a $US600 million loss at the earnings before interest and tax level to a $2.2 billion positive contribution. Copper has flatlined but the prices are still strong by historical standards.

BHP shareholders might look at the petroleum result – a turnaround at the EBIT level from a loss of $US108 million to a profit of $US2 billion – and the near-term outlook for oil and gas prices and question the timing and terms of last year’s decision to merge BHP’s business with Woodside’s.

They will, of course, maintain an exposure to 48 per cent of the business’ earnings and prospects, share in the $US4 billion of synergies and get the same exposure to Woodside’s gas portfolio if the deal is completed, as BHP expects, in the middle of this year.

LNG prices have soared amid a global gas shortage that has been exacerbated by Russia’s throttling of gas volumes to Europe as part of its maneuvering around Ukraine and by the impact of COVID on global production and logistics.

Even without petroleum, BHP will generate torrents of cash even in a less buoyant price environment because of its disciplines on costs and its allocation of capital.

With a pristine and under-leveraged balance sheet – the net debt of $US6.1 billion is a long way short of its new target range for net debt of $US5 billion to $US15 billion – chief executive Mike Henry and his board have a lot of options if they choose to exercise them.

The biggest and most expensive project underway is the massive Jansen potash project in Canada but that’s still at least five years away from coming online.

There’s scope for acquisitions and some speculation that it’s looking (although its experiences in the US shale sector last decade have made it more cautious about overpaying for access to resources) or for doing what BHP has done so profusely in recent years and giving the surplus cash – fully franked – back to its appreciative shareholders.

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