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- Recently, the Australian dollar touched a four-year low of 0.8553 against the U.S. dollar.
- The Reserve Bank of Australia expects the Australian dollar to depreciate further.
- BHP Billiton's earnings are sensitive to the strength of the Australian dollar against the U.S. dollar.
- The company has great financial efficiency ratios and a great dividend.
- The projected earnings for next year are less than what the company earned in the trailing twelve months.
- The stock shows about the same risk as reward and I'm going to take a pass on purchasing the stock for the IRA.
- BHP Billiton's valuation has suffered due to associations with the falling prices in iron ore and coal.
- BHP Billiton has undertaken cost cutting initiatives, and is spinning out lower growth divisions into a new listed entity - 'New Co.'
- Valuation on cash flows is $160-180 billion vs. market capitalization of $150 billion.
BHP Billiton: Lower Iron Ore And Crude Oil Prices Will Impact Earnings
- Iron ore prices are declining.
- Crude oil price are declining.
- BHP Billiton's net profit after tax is sensitive to iron ore and crude oil prices.
- Tugboat officers at Port Hedland approved a strike action for the second time this year.
- If the officers strike, then it will affect exports of BHP Billiton and Fortescue Metals Group.
- A recent amendment to the Fair Work Act will prevent tugboat officers from threatening iron ore miners to resort to strikes in the future.
- BHP Billiton signs MOU with Mexico's Pemex for information exchange.
- This could lead to a formal working partnership for offshore oil development.
- The resource rich Perdido oil province would be very attractive for BHP to work in.
- Iron ore prices have overshot to the downside, and are due for a rebound.
- Any rebound in commodity prices will deliver a meaningful impact to the bottom line.
- BHP Billiton's spin-off of assets will boost shareholder value in the long run.
- BHP Billiton has lower exposure to iron ore compared to its peers. The recent fall in iron ore prices is not a worry.
- Mexico has opened its oil & gas resources for foreign companies. BHP Billiton is interested in developing the country's deep water resources, which will enhance its petroleum portfolio.
- Copper output from Escondida mine may increase 220,462 tons (200,000 tonnes) per annum from fiscal year 2018.
- The recent fall is a buying opportunity for long term buyers.
- BHP Billiton recently announced a spin-off of a selection of its non-core assets.
- The company has, however, excluded Nickel West from the planned spin-off.
- BHP Billiton plans to sell Nickel West as a standalone company.
- While some analysts and investors have questioned the company’s decision to not include Nickel West in the spin-off, the company has taken the right decision.
These 3 Australian Iron Ore Miners Stand Up Best To Weakening Spot Prices
- Iron ore spot prices are falling to levels lower than previous 2012 low.
- Increased production volumes are generating even higher earnings despite depressed commodity price.
- The winners are those companies that meet classic cyclical investing standards.
BHP Billiton Restructures For Growth, Continuing Reign As Global Mining Giant
- Reportedly, BHP will spin off a number of assets into a new company, aptly-named NewCo, to be listed on Australian stock exchange and in Johannesburg.
- NewCo will take charge of businesses that aren't seen as essential to BHP's future, while BHP will continue to focus on iron ore, copper and potash.
- Continued experimentation has proved successful for BHP, having reported a 23% increase in net profit for 2013 and increased cash flow in 2014 by over $8 billion.
- With an added dividend increase of 4%, it appears BHP is quite confident in its future—we suggest investors be so, as well.
BHP Billiton Will Create Value For Shareholders In The Long Term
- As the commodity boom has ended, miners have been forced to reassess their strategy.
- This week BHP Billiton announced spin-off of its non-core assets into a new independent company.
- BHP Billiton’s shares fell sharply after the announcement of the spin-off; however, the drop in shares was due to the fact that the company did not announce a share buyback.
- Weaker iron ore prices have resulted in BHP Billiton not announcing a buyback.
- The company’s strategy to simplify its portfolio and focus on core assets will eventually create value for shareholders.
BHP Billiton To Shed Non-Core Businesses, Expand Eagle Ford Shale Oil For Potential Export Sales
- Even BHP Billiton, the world’s largest mining company, has to conform to cyclical changes in its industry.
- De-merger plans of non-core commodity businesses – possible $14 billion market cap company - could help improve margins and re-direct capex to higher profit businesses.
- BHP Billiton Limited is expanding its oil and gas developments in North America for better diversification and higher revenues.
- The iron ore segment is facing challenges like iron ore price decline, workers strike, and strengthening Australian dollar.
- The direction of copper prices is also important for copper segment.
- The coal segment is facing challenges like lower coal prices, rising cost, and strengthening Australian dollar.
- The outlook for petroleum segment looks good as liquids contribution to the total shale production is expected to rise.
BHP Billiton: Winner Of Australia's Carbon Tax Repeal
- BHP stands to gain about $77 million per year from the repeal of the Australian carbon tax worth about a total of $7 billion.
- It is not a significant sum, given the size of company.
- The impact on the company depends very much on what it decides to do with the money.
- An Economic Castle assessment is much more pertinent to stock analysis than the moat.
- Iron ore prices have slipped below $100 ton, and BHP thinks they will continue to slide for the next few years.
- BHP's Economic Castle is growing less attractive.
- BHP Billiton is considering the de-merger of its non-core assets, including nickel, thermal coal, and aluminium. Some of these assets have low profit margins.
- Mick Davis, former Xstrata chief, is considering acquiring the company's non-core assets for $15 billion through X2 Resources.
- The offloading of non-core assets will enable the company to focus on core assets, including iron ore, copper, coal (metallurgical), potash, and petroleum. This will improve the company's shareholder return.
Today, 4:26 PM
Thu, Nov. 20, 10:40 AM
- BHP Billiton (BHP -1.5%) CEO Andrew Mackenzie seeks to reassure investors of the company's commitment to boosting cash returns as commodity prices slide, while saying a buyback of shares is not the top priority right now.
- Mackenzie says his key focus is to keep the company’s balance sheet strong - which includes maintaining what he says is a solid A credit rating - followed by a strong dividend, "then we selectively invest in what we have for growth, and only then if we can see excess cash might we consider [a buyback]."
- UBS said recently that it did not expect any such buyback until at least the middle of next year given the steep drop in iron ore prices, and Jefferies has said BHP is likely to underwhelm from a capital returns perspective unless commodity prices rebound more than expected.
Wed, Nov. 19, 12:26 PM
- Iron ore prices extend their historic decline, approaching $70/dry ton in a retreat to the lowest level in more than five years, as analysts rule out any Chinese restocking that typically supports prices towards the end of each year.
- The price is now at a level at which all but the three biggest low-cost producers - Rio Tinto (RIO -2.4%), BHP Billiton (BHP -3%) and Fortescue (OTCPK:FSUMF -8.8%) - are either generating losses or are struggling to break even.
- Steel stocks also are getting whacked: SCHN -5.4%, X -4%, PKX -3%, AKS -3%, CMC -2.7%, STLD -2.5%, NUE -1.6%, MT -1.3%.
Tue, Nov. 18, 12:49 PM
- Iron ore extends its tumble deeper into five-year lows as declining home prices in China add to worries that an economic slowdown in iron ore's biggest buyer will deepen and exacerbate an oversupply.
- Ore with 62% content delivered to Qingdao, China, has retreated 47% YTD to $71.80 a dry ton, and Citigroup thinks prices may drop to less than $60/ton next year as output rises further and demand remains weak; China’s bad loans climbed in Q3 by the most since 2005, while new-home prices declined, adding to speculation the cooling economy will weaken further.
- VALE -2.9%, RIO -1.9%, BHP -1.1%, CLF -6%, X -1.4%, AKS -1.9%.
Tue, Nov. 18, 7:49 AM
- Tugboat engineers at Australia’s Port Hedland have voted down a proposed agreement on wages and leave, extending the threat of disruptions to iron ore shipments at the world’s largest bulk export terminal.
- The rejection renews the risk of delaying exports by companies including BHP Billiton (NYSE:BHP) and Fortescue Metals (OTCPK:FSUMF).
- Iron ore is Australia’s biggest commodity export earner and disruptions could cost suppliers A$100M/day, BHP has said, and shipments through Port Hedland represented ~55% of the country’s iron ore exports last year.
Fri, Nov. 14, 4:56 PM
- New developments and the expansion of older oil fields are expected to lift deepwater Gulf of Mexico production 18% Y/Y to 1.9M boe/day in 2016, the first new production peak seen since 2009, according to Wood Mackenzie’s latest outlook.
- However, production is expected to plateau for the remainder of the decade following the 2016 peak due to the depletion of legacy fields and a limited number of new projects coming onstream.
- Among top Gulf producers: RDS.A, RDS.B, BP, CVX, BHP, APC, APA, HES, E, EXXI.
Tue, Nov. 11, 5:47 PM
- BHP Billiton (NYSE:BHP) abandons the sale of its Nickel West mining operation in Western Australia, saying it had not been able to find a buyer willing to pay an acceptable price for the asset.
- BHP had been reviewing its options for the Nickel West business, which includes the Mount Keith, Cliffs and Leinster mines and associated concentrators, the Kalgoorlie smelter, Kambalda concentrator and Kwinana refinery.
Mon, Nov. 10, 8:56 AM
- Rio Tinto (NYSE:RIO) CEO Sam Walsh tells Reuters he is unfazed by plunging ore prices, believing his company's industry-low production costs of $20.40/metric ton in H1 2014 will help it ride out the storm.
- Walsh also says he is confident of increasing returns to shareholders at full-year results in February, adding that RIO has no plans to cut its 2015 capital spending target of $8B, announced last year.
- RIO is on track to increase output 9% to 290M metric tons ahead of a push to 360M metric tons, ranking it second in size behind VALE and far ahead of third-place BHP.
Mon, Nov. 10, 7:58 AM
- Tugboat masters and deckhands at Australia’s Port Hedland have voted to accept a new labor agreement.
- While engineers still plan a four-hour work stoppage on Nov. 12, the agreements lessen the risk of disruption to iron ore supplies from BHP Billiton (NYSE:BHP) and Fortescue Metals (OTCPK:FSUMF).
- Iron ore is Australia’s biggest export earner, and shipments through Port Hedland represented 55% of the country’s iron ore exports last year; more than 80% of the cargoes go to China.
Fri, Nov. 7, 10:58 AM
- Iron ore prices cap their biggest weekly decline in more than five months and its third straight week of losses amid an expanding global surplus.
- Ore with 62% content delivered to Qingdao lost 4.7% this week to $75.84/dry metric ton, data from Australia's Port Hedland showed record iron ore exports last month, and steel mill closures ordered by China this week to curb air pollution for a global summit also was seen hurting demand.
- Iron ore has lost 44% YTD as producers including Vale (VALE +3.2%), BHP Billiton (BHP +3.7%) and Rio Tinto (RIO +2.6%) expanded supplies, and ABN Amro's Ben Cheung does not expect the oversupply situation to be alleviated next year.
- Vale, which is seeking to boost output by 50%, this week opened its $1.4B port in Malaysia where its Valemax vessels can unload cargoes for onward shipping to clients in Asia in smaller vessels.
Wed, Nov. 5, 2:01 AM
- BHP Billiton (NYSE:BHP) is planning to export ultralight oil from the U.S. without getting formal approval from Washington, testing the waters of exporting the minimally processed oil without a permit.
- People in the industry say the U.S. Commerce Department, which oversees oil exports, has been encouraging companies to pursue independent exports without having to issue new rulings permitting it, a process being called "self-classification."
- Pioneer Natural Resources and Enterprise Products Partners surprised oil markets earlier this year when they said they had obtained government approval to export the ultralight oil, known as condensate.
- BHP Billiton says it has already signed an agreement to sell a 650K barrel cargo to Swiss trader Vitol.
Mon, Nov. 3, 10:35 AM
- In a WSJ interview, BHP Billiton (BHP -1.2%) CEO Andrew Mackenzie discusses his belief that large resource companies can easily become unmanageable, with too much complexity and conflicting internal cultures.
- Mackenzie is seeking to sell or spin off a collection of BHP’s unwanted assets, so that he can focus the rest of the company on just four or five key commodities: coal, copper, iron ore, oil and gas, and perhaps potash.
- BHP is among the rising number of natural resources companies that are slimming down to hone their business and make earnings more predictable, and big deals such as Glencore's recent merger offer with Rio Tinto are “effectively off the agenda," the CEO says.
- The strategy is not universally loved; "The main beneficiary of the proposed demerger would appear to be the multitude of advisers that will no doubt require significant compensation for helping structure the deal,” says Bernstein analyst Paul Gait.
Mon, Oct. 27, 6:25 PM
- Cliffs Natural Resources (NYSE:CLF) -0.2% AH after reporting Q3 earnings that beat expectations and a 16% Y/Y drop in revenues that nevertheless met estimates.
- CLF swung to a loss in the quarter, dragged down by a $6B writedown related to its purchase of a Canadian iron ore mine as well as 32% lower iron ore prices and 17% lower met coal prices.
- CLF says Q3 costs at its eastern Canadian operations were $81.71/ton, and it expects costs to remain at $80-$85; the big three miners - BHP, RIO and VALE - control massive mines, ports and railroads, which allows them to produce iron ore at $50/ton or lower.
- Iron ore pellet sales volume totaled 6.8M tons (+8% Y/Y) for the U.S., 3.1M tons (+11%) for Asia Pacific, and 2.3M tons for eastern Canada (-12%); North American coal sales volume was 1.9M tons (+15%).
- Gross margin narrowed to 9.8% from 22.5% a year earlier.
- "Despite continued cost cutting progress at Bloom Lake, Phase I is not feasible. By the end of this year, we will have a solution for Bloom Lake," CEO Lourenco Goncalves says.
Mon, Oct. 27, 7:57 AM
- BHP Billiton (NYSE:BHP) offers further details about how it plans to meet its cost reduction and productivity improvement targets, and says it may sell some or all of its Fayetteville shale acreage in the U.S.
- BHP expects a minimum $3.5B in annualized productivity gains by the end of FY 2017, with more than $2.3B to come from cash cost savings, which should help the company generate a 20%-plus nominal rate of return based only on its core portfolio of assets, according to CEO Andrew Mackenzie.
- BHP also says it is planning to divest its Fayetteville acreage, as it has decided to concentrate on the development of its high quality Haynseville gas field.
Wed, Oct. 22, 10:43 AM
- BHP Billiton (BHP -1.1%) is the latest company to report record output of metallurgical coal, as extra supply far outpaces demand in countries such as China and Japan, which produce much of the world’s steel.
- BHP says it produced a record 12.8M metric tons of met coal in Q3 - including output from the major new Caval Ridge mine in Australia - up 7% Q/Q and 25% Y/Y, and Anglo American’s (OTCPK:AAUKF, OTCPK:AAUKY) H1 2014 met coal production jumped 21% Y/Y.
- The willingness to dig up more coal (NYSEARCA:KOL) despite lower prices mirrors a similar push in iron ore, where global miners miners are investing and producing more in a bet that their efficiencies of scale will allow them to profit, but critics say the strategy risks creating supply gluts that will take years to clear.
- The price for Australian premium hard coking coal has dropped 16% this year to $110/ton, near the lowest level in more than seven years and well below the $300/ton fetched in early 2011.
Tue, Oct. 21, 7:28 PM
- BHP Billiton (NYSE:BHP) reports Q3 production numbers showing the iron ore and coking coal divisions performed as well as or better than expected, as overall production rose 9% Y/Y with records achieved for eight operations and four commodities.
- The 62M metric tons produced by BHP's Pilbara iron ore division means the business is ahead of schedule on its target to produce 245M metric tons in FY 2015.
- Produced a better than expected 13M tons of met coal, a 25% increase, as Queensland Coal achieved record quarterly production and sales volumes.
- Petroleum production gained 7% to 67.4M boe, as onshore U.S. liquids volumes jumped 49% to a record 11.5M boe.
- Full year production guidance remained in line with prior guidance for iron ore, copper, petroleum and both types of coal.
BHP vs. ETF Alternatives
BHP Billiton Ltd is a natural resources company. The Company is engaged in the producing commodities, including iron ore, metallurgical and energy coal, conventional and unconventional oil and gas, copper, aluminium, manganese, uranium, nickel and silver.
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