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.
Wed, May 6, 7:54 AM
- BHP Billiton (NYSE:BHP) remains committed to maintaining or increasing its dividend despite concerns that the policy reduces its financial flexibility, CEO Andrew Mackenzie tells WSJ.
- Mackenzie's comments come after S&P earlier this week revised its outlook on BHP to negative from stable, saying the miner's payout vow could weaken its financial position given the broader downturn in commodity prices.
- BHP -1% premarket.
Tue, May 5, 5:24 PM
- Copper prices have risen to a 2015 high and their highest levels since November, as global demand is seen driving prices.
- A series of stimulus programs from China in recent months has helped convince investors that the world’s largest copper consumer is serious about steadying its economic slowdown; at the same time, disruptions in copper mining and supplies have sparked a belief that the market may end the year with global production and demand nearly balanced, rather than with a supply surplus.
- Glencore (OTCPK:GLCNF, ]]GLNCY]]), the world's no. 3 copper miner, reported its Q1 copper production fell 9% Y/Y, partly due to a planned shutdown for maintenance at its Collahuasi mine in Chile; disruptions at operations owned by BHP Billiton (NYSE:BHP) and Freeport McMoRan (NYSE:FCX) also have fueled speculation that a global surplus will shrink this year.
- ETFs: JJC, DBB, CPER, BOM, RJZ, BOS, BDD, JJM, CUPM
Mon, May 4, 12:41 PM
- Standard & Poor's reduces its outlook on BHP Billiton’s (BHP +0.1%) credit rating to negative as it forecasts weaker cash flows.
- S&P says continued weakness in commodity prices, combined with BHP’s commitment to a progressive dividend payment, may weaken key financial metrics to below its expectations for an A+ rating without offsetting measures.
- S&P maintains its stable outlook on Rio Tinto (RIO -0.4%), which had been placed on watch for a possible negative ratings action along with BHP and six other iron ore producers.
Mon, May 4, 3:47 AM
- BHP Billiton's (NYSE:BHP) shareholders are expected to approve the biggest ever spin-off in the mining industry on Wednesday, looking to squeeze more value out of a series of long-neglected aluminum and nickel assets.
- The new company, South32, risks a tough May 18 debut on the Australian bourse, with investors nervous about weak commodity prices, short mine life spans and declining ore grades.
- As a result of the uncertainty, analyst valuations vary widely. Morgan Stanley is predicting it may start with a market cap worth A$8.5B ($6.7B) and Investec around $12B.
- Previously: BHP outlines plan to spin off South32 (Mar. 16 2015)
Wed, Apr. 29, 11:11 PM
- The recent rally in iron ore prices is built on shaky foundations, as today's 4.6% drop emphasizes, writes Heard on the Street's Liam Denning.
- Optimism had sprung in part from a 5% jump in Chinese crude steel production in the first 10 days of April, but Denning says structural headwinds - China’s desire to pivot away from fixed-asset investment and its need to deal with bad debt - remain.
- Bulls also have cited BHP Billiton's (NYSE:BHP) plans to scale back iron ore capacity expansion plans in Australia, but Caroline Bain at Capital Economics says a cut to potential supply of just 20M metric tons does not amount to much; also, BHP and Rio Tinto (NYSE:RIO) are expected to raise output heading into their June fiscal year-ends.
- Also worth noting is that while Cliffs Natural Resources (NYSE:CLF) reported positive Q1 earnings, free cash flow was negative despite an 85% cut in capital spending; in its earnings conference call, CLF spoke almost wistfully of the need for BHP, Rio and Vale (NYSE:VALE) to curb expansion to rebalance the market.
Mon, Apr. 27, 3:58 PM
- BHP Billiton (BHP +0.9%) says it is contesting A$522M ($409M) in Australian tax bills on its Singapore marketing operations up to 2010, after having paid almost no tax in Singapore since 2006.
- BHP told an Australian Senate panel that during 2006-14 its Singapore marketing business earned profits of $5.7B on which it paid just $121K in tax in Singapore, but that 58% of the profit earned by the Singapore hub is subject to tax in Australia at the company tax rate of 30%.
- The A$522M in taxes BHP faces from Australia include contested tax plus interest and penalties owed on transfer pricing - the price at which BHP's Australian entities sell commodities they mine to the Singapore marketing business.
- Rio Tinto (NYSE:RIO) revealed at the tax hearing that it pays a 5% tax rate on its Singapore marketing operations.
Fri, Apr. 24, 12:29 PM
- Vale (VALE +9.1%) continues to surge, headed for its biggest weekly gain in 16 years and gaining nearly 50% since Wednesday's announcement that it produced record-high levels of iron ore, nickel and other commodities during Q1.
- Also on Wednesday, BHP Billiton (BHP +3.4%) said it was curbing expansion plans and supplies from higher-cost mines dropped, easing concerns over a global glut and sparking iron ore biggest one-day price jump since 2012.
- "Vale is reacting to the rebound in iron ore prices,” said an equity analyst at CM Capital in Sao Paulo. “Most of Vale’s costs are fixed, so whenever there’s an increase in prices, there’s a direct impact on earnings.”
- Iron ore prices jumped 5.5% overnight to $57.81/dry ton and have rallied 23% since bottoming out at $47.08 on April 2.
- Also: RIO +1.6%, CLF +3.7%.
Wed, Apr. 22, 10:11 AM
- Iron ore prices enjoy their biggest one-day jump since October 2012, rising 5.9% to more than $54/metric ton - still not far above 10-year lows - after BHP Billiton (BHP +2%) announced it is slowing the pace of its expansion program.
- BHP says it is deferring a planned $600M project to reduce bottlenecks at Australia’s Port Hedland, the world’s biggest bulk export terminal, causing it to miss its target of raising production to 290M tons/year by mid-2017.
- Analysts say the decision will lower BHP's capex profile over the next few years to preserve free cash flow to support the dividend and balance sheet, and could deflect some of the negative public commentary about surplus supply.
- The postponement is similar to Rio Tinto’s (RIO +2.2%) deferral last year of an investment decision on the $1B Silvergrass mine until 2016.
- Also: VALE +7%, CLF +0.6%.
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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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