While a bump in the oil price has given Royal Dutch Shell and BP a lift recently, the divergent fortunes in the resources sector between oil and gas firms and miners is evident in the record first half dividend paid by BHP not too long after the oil majors had slashed their own payouts
“Now the most valuable company on the FTSE 100, BHP and other companies focused on metals and minerals, like Glencore which resumed its own dividend today, are potential beneficiaries rather than the potential victims of an energy transition which the traditional oil firms appear to be,” said AJ Bell’s Russ Mould.
“That’s because the commodities they mine and trade are required to build the wind turbines and electric vehicle components required if the world is to wean itself off fossil fuels.
“In the near term, miners may enjoy some additional benefit as global governments attempt to boost their recoveries from the pandemic by investing in large infrastructure projects.
“BHP has already benefited hugely from Chinese demand for iron ore, a key component in the manufacture of steel.
“The caveat with BHP is that it has its own large petroleum business, while this has proved to be a benefit during oil’s recent rally, it could become a fly in the ointment in the future.
“Glencore also has exposure to oil and coal which contributed to a pretty mixed set of full year results, with big trading profit but a drop in overall revenue. The big development, which paved the way for the reinstatement of the dividend, was a material reduction in debt.”