Yesterday, 12:58 PM
- China's commitment to invest in Brazil's iron ore sector puts the big Australian exporters on notice, as Vale (VALE +1.6%) is forecast to increase production from current levels of 330M metric tons of iron ore to 450M by 2018 - greater than the combined output of BHP Billiton (BHP +1.2%) and Rio Tinto (RIO +0.9%).
- China's new A$5B revolving line of credit for Vale means the company now can fund a $16B expansion of its iron ore mines; the deal also saw Chinese invest in several of Vale's giant iron ore carriers, ships that can carry vastly more resources and reduce transport costs by ~25%.
- Vale last year accounted for 18% of the supply to the Chinese market vs. nearly 60% by Australian producers.
Yesterday, 10:41 AM
- Chile's government has removed BHP Billiton's (BHP +0.7%) $4B Spence copper expansion project from its 10-year development timeline, saying it expects the miner will miss its targeted deadline of first production by 2020.
- BHP has conducted a pre-feasibility study to deliver copper from the ore body that lies beneath its existing Spence mine by 2020 as part of a plan to extend the life of the facility by up to 50 years, but Chile's copper commission says it expects the timeline to slip, with the massive Escondida mine remaining the priority.
- In 2012, the commission predicted the development of $105B of resource projects in Chile in the following decade, but the slump in global commodity prices has prompted it to revisit its 10-year horizon and downgrade the pipeline of projects to $75B by 2025.
Yesterday, 8:22 AM
- Australia's government says it will not seek to hold a special parliamentary inquiry into recent activity in the iron ore market, a quick turnaround after Prime Minister Abbott said last week that he backed an inquiry because it was needed to discover the facts behind the sharp drop in iron ore prices.
- A senator had been calling loudly for parliament’s economics committee to investigate claims that BHP Billiton (NYSE:BHP) and Rio Tinto (NYSE:RIO) are driving down prices by boosting supply to undermine smaller competitors; a probe was advocated by some smaller Australian producers such as Fortescue Metals (OTCPK:FSUMF) that are more vulnerable to lower prices because they lack to scale to keep down production costs.
- BHP CEO Andrew Mackenzie said in recent days that the uncertainty around an inquiry would damage investor confidence in Australia, and this view apparently won out.
- BHP +1.4%, RIO +1.8% premarket.
Wed, May 20, 9:10 AM
- BHP Billiton (NYSE:BHP) agrees to pay a $25M fine to settle SEC charges that it violated the Foreign Corrupt Practices Act when it sponsored the attendance of foreign government officials at the 2008 Olympics in Beijing.
- BHP paid for 60 government officials and employees of state-owned employees, mostly from Africa and Asia, and spouses and others to attend the event, valued at $12K-$16K per package.
- BHP neither admitted nor denied wrongdoing in agreeing to settle the civil charges.
Tue, May 19, 9:18 AM
- BHP Billiton (NYSE:BHP) is calling a proposed parliamentary inquiry into Australia’s iron ore sector a “ridiculous waste of money” that would damage the country’s economy and shift investment to Brazil
- "It sends a terrible signal to our customers, and it flies in the face of commitments we’ve made at the highest levels in places such as China, Japan and Korea that they can count on secure supply from us at fair prices," BHP CEO Andrew Mackenzie says.
- Several smaller iron ore companies want Australia's government to open an inquiry they say would show BHP and Rio Tinto (NYSE:RIO) are intentionally oversupplying the market to keep prices low in a move that is damaging rivals and the economy.
- Australian PM Tony Abbott last week lent his support to calls for an inquiry.
Mon, May 18, 9:15 AM
Mon, May 18, 8:15 AM
- BHP Billiton (NYSE:BHP) is lowering the priority of its Scarborough liquefied natural gas project with Exxon Mobil (NYSE:XOM) in Australia, BHP petroleum president Tim Cutt says, amid falling prices and increasing competition from the U.S.
- “LNG prices are down quite a bit from last year,” so the project “falls a bit lower” on the list of opportunities, Cutt says.
- Cutt has backed plans to develop what could become the world’s largest floating LNG project and that BHP was aligned with partner XOM, which has said that while significant progress had been made, it needs to find ways to make the proposed venture more profitable and overcome challenges including the location and water depths.
Mon, May 18, 3:39 AM
- BHP Billiton (NYSE:BHP) shares slump 4.6% in London after its South32 spin-off was valued at A$11.3B (US$9.1B), at the lower end of expectations, when it debuted on the Australian Securities Exchange today.
- BHP shareholders are receiving one share in South32 for each BHP stock they hold.
- South32, which is also listed in London and Johannesburg, fell 3.8% in Australia.
- The demerger leaves BHP to focus on its most profitable assets of iron ore, copper, petroleum, coal and potash.
Fri, May 15, 10:58 AM
- The price of coal will play a role in deciding the value of BHP Billiton (NYSE:BHP) spinoff company South32 when it starts trading in Australia Monday, WSJ reports.
- Coal, which accounts for ~19% of the spinoff’s earnings, has been in a slump, and its price will be taken into consideration along with the Australian dollar and South African rand, as well as aluminum and manganese prices.
- When BHP first announced its breakup plan last August, some analysts thought South32 could be worth as much as US$15B, but Investec Securities now suggests South32 could have a market value as low as US$7B.
Fri, May 15, 8:37 AM
- Australian Prime Minister Abbott says he will support a special parliamentary inquiry into the economic impact of sharply lower iron ore prices, ratcheting up pressure on top producers Rio Tinto (NYSE:RIO) and BHP Billiton (NYSE:BHP).
- The PM says that while he opposes "predator behavior" by companies, "I’m very conscious of the fact that Rio and BHP are Australia’s biggest corporate taxpayers. I want them to continue making a lot of profits here in Australia.”
- Rio and BHP have been flooding the market with iron ore, which has left smaller, high-cost producers struggling to survive; The iron ore price hit $46.70/metric ton last month, its lowest in a decade, although it has picked up to ~$61 this week.
Thu, May 14, 9:58 AM
- BHP Billiton (BHP +1%) is out in defense of its strategy of expanding iron ore output into an oversupplied market, saying the company’s approach is rational even as iron ore prices have slumped ~40% in the past 12 months.
- "This is a market which is highly competitive, it's cyclical and so our performance will be dependent on being the most efficient supplier and it shouldn’t be dependent on supply restraint,” says iron ore marketing VP Alan Chirgwin.
- Global iron ore supply could rise by 100M-110M metric tons this year while demand is only estimated to grow by 30M-40M metric tons, Chirgwin says, adding that "supply growth over the last 12 months has outpaced demand growth and that will keep pressure on prices next year."
- Also: RIO +0.9%, VALE +0.5%.
Tue, May 12, 5:02 AM
- Looking to push competitors out of the market, BHP Billiton (NYSE:BHP) is aiming to reduce iron ore unit costs at its Western Australia operations by 21% to $16 per tonne in the 2016 financial year, down from just below $20 per tonne in April.
- The mining company also expects cut capital and exploration expenditure to $9B this year from $12.6B in 2015.
- BHP +0.8% premarket
Mon, May 11, 4:59 PM
- Oil production from seven major U.S. shale plays is expected to fall by 86K bbl/day in June, according to the latest report from the Energy Information Administration.
- Oil output at the Eagle Ford shale play in South Texas is forecast to see the biggest decline, down 47K bbl/day, while production at the Bakken shale play, centered in North Dakota, is expected to drop by 31K bbl/day, the report says.
- "The data shows that production in the Bakken and Eagle Ford [plays] peaked in March at 1.33M bbl/day and 1.73M bbl/day, respectively," says WTRG Economics energy economist James Williams.
- Among the top Eagle Ford producers: EOG, BHP, COP, CHK, MRO, APC
- Among the top Bakken producers: CLR, EOG, WLL, HES, XOM, OAS, NOG, EOX, MRO
Mon, May 11, 11:58 AM
- The recent rally in iron ore is only temporary, and iron ore’s long-term fundamental weaknesses of oversupply and a lack of demand is not likely to change, Goldman Sachs says.
- No major producer has revised its long-term production target downwards, Goldman says, also believing that the deferral of capex at BHP Billiton (BHP +0.8%) reflects further gains in efficiency rather than a change in strategy; also, the firm thinks Atlas Iron (OTCPK:AGODY) is the first - and maybe not the last - Tier 2 producer to reverse a mine closure.
- Goldman expects iron ore to average $52/metric ton this year and fall to $44 in 2016 and $40 in 2017.
- Iron ore producers are higher after the People’s Bank of China again cut interest rates over the weekend: RIO +2.3%, VALE +1.6%.
Thu, May 7, 8:32 AM
- Rio Tinto (NYSE:RIO) Chairman Jan du Plessis says his company will not follow rival BHP Billiton (NYSE:BHP) by spinning off unwanted assets, brushing aside speculation it could carve off parts of its business as it copes with weaker commodity markets.
- While du Plessis says spinoffs can be an effective tool for generating value, CEO Sam Walsh says he views Rio's US$17.5B in asset sales over the past five years as achieving a similar objective to BHP's corporate breakup.
- Jefferies has estimated Rio's coal business is worth ~US$3.6B and would likely attract buyers if the miner decided to walk away from the industry.
- Rio's stance comes a day after BHP's shareholders voted overwhelmingly in favor of a plan to spin off several assets, including nickel, aluminum and manganese operations.
Wed, May 6, 9:56 AM
- BHP Billiton (BHP -0.3%) shareholders in Australia and Britain voting by proxy overwhelmingly approve the spinoff of South32, which includes some of the miner's smaller assets, paving the way for a listing on May 18; final results will be announced later today.
- The spinoff will produce alumina, aluminum, coal, manganese, nickel, silver, lead and zinc from mines and smelters in Australia, Brazil, Colombia, South Africa and Mozambique; the assets, long overshadowed by BHP's much larger iron ore, petroleum, copper and coal businesses, generated underlying earnings of $446M on revenue of $8.3B last year.
- Forecasts on how much South32 will be valued at have dropped to $5B-$10B since the spinoff was announced last year, as prices for its main products, including aluminum and manganese, have slumped.
- South32 will be ready to look at potential acquisitions after focusing on productivity in its first six months, CEO-elect Graham Kerr says.
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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