Tag Archives: BHP

Business, Finance, Occupation & Industry

South African Miners No Longer Willing to Pay to Play

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By Rich Duprey, The Motley Fool

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Considering the work stoppages and violent clashes that have become the norm at South African precious-metals mines, perhaps the miners were wondering exactly what they were getting for their money. An expose by South Africa‘s Daily Maverick has uncovered a system where miners such as AngloGold Ashanti and BHP Billiton surreptitiously paid for the salaries of the heads of the local mining unions to keep the mine workers in line, and it’s only because the miners sought to end the “uncomfortable arrangement” with the unions that the matter came to light.

Mining in mineral-rich South Africa has been contentious for years, but in recent months, clashes have become particularly violent, with a strike last August at Lonmin’s Marikana platinum mine leaving 44 people dead and bringing the crisis to the forefront.

Much of the violence is said to be a result of the unions’ competition to represent the workers as the new Association of Mineworkers & Construction Union seeks to unseat the powerful National Union of Mineworkers, which is closely tied to the African National Congress political party. AngloGold Ashanti paid the salary of NUM‘s president, while BHP paid the salary of the deputy president. The Lonmin clash was in part a result of workers who no longer wanted to be represented by NUM, as they saw a conflict of interest between the union representatives and the miners.

Mining operations have long been subject to the vagaries of strikes and violence in South Africa. Harmony Gold suspended its operations at Kusasalethu because of security concerns, Gold Fields lost 35,000 ounces of production and had its credit rating reduced by Standard & Poor’s because of labor unrest (and reduced its full-year production forecast by 200,000 ounces), and Xstrata has had to halt activity several times as a result of union violence.

From Barrick Gold to Kinross Gold, miners have been looking to exit from their South African holdings — partially as a result to bring costs under control as commodity prices have plunged, but also as a means of insulating themselves from the vagaries of the country’s labor problems.

The Daily Maverick indicated that jealousy over the payouts may have been a contributing factor to the violence, as unions on the outs wanted in on the lucrative stipends the others were receiving. Since the payments were said to be originally enacted to create a more harmonious relationship with the unions, the escalating level of clashes may have left the miners wondering what they were getting for their money.

It was a relationship that was bound to be problematic considering the inherent conflicts of interest, and ending the system may help to ameliorate, even if it doesn’t eliminate, the violent and bloody protests of labor unions.

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Source: FULL ARTICLE at DailyFinance

News, Politics, Government

Dominion Diamond Completes $553 Million Acquisition Of Canadian Diamond Mine

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By Anthony DeMarco, Contributor Dominion Diamond Corp., formerly Harry Winston Diamond Corp., said Wednesday it has completed its acquisition of the Ekati Diamond Mine in Canada’s Northwest Territories and related diamond sorting and sales facilities in Yellowknife, Canada, and Antwerp, Belgium. The Canadian subsidiary of mining company BHP Billiton was the majority owner of the mine and the other facilities. BHP is exiting the diamond business to concentrate on other mining activities.

Source: FULL ARTICLE at Forbes Latest

Business, Finance, Occupation & Industry

Dominion Diamond Buys Ekati Mine

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By Rich Smith, The Motley Fool

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Toronto-based diamond miner Dominion Diamond — the company formerly known as Harry Winston Diamond — has completed its purchase of BHP Billiton‘s stake in the Ekati Diamond Mine, “as well as the associated diamond sorting and sales facilities in Yellowknife, Canada, and Antwerp, Belgium,” Dominion Diamond announced Wednesday.

Dominion Diamond says it paid a total of $553 million to obtain BHP‘s interests in the mine, which contains both an operational “Core Zone” and also a “Buffer Zone” possessing potential for future exploration and development. In truth, however, Ekati brought with it cash on hand of $65 million as well as 10 weeks’ worth of diamond inventory, which reduce the net value of the price Dominion Diamond paid for the mine.

Management said in a statement that it will release a detailed plan for how it expects to exploit the mine on or before April 24. Shares of the company gained 0.4% in Wednesday trading ahead of the announcement, closing at $16.66.

The article Dominion Diamond Buys Ekati Mine originally appeared on Fool.com.

Fool contributor Rich Smith and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Should I Buy Rio Tinto or BHP Billiton?

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By Roland Head, The Motley Fool

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LONDON — After making strong gains toward the end of last year, shares in miners Rio Tinto  and BHP Billiton  have fallen by around 10% since the beginning of 2013.

The falls have been caused by institutional shareholders trimming their holdings in each company — but I believe this is a great opportunity to buy into these two world-class companies at very attractive prices.

Rio Tinto vs. BHP Billiton
‘m going to start with a look at a few key statistics that can be used to provide a quick comparison of these two companies, based on their last published results:

Value

Rio Tinto

BHP Billiton

2012 revenue

£33,529

£44,043

P/E ratio

9.5

11.9

Dividend yield

3.5%

3.9%

Net gearing

41%

45%

Both Rio and BHP made paper losses last year, after writing down the value of several major assets. The P/E ratios I’ve included in the table above are based on underlying earnings, which I think provides a more realistic view of each company’s performance.

The income available from both companies is also attractive — both dividend yields are above the FTSE 100 average of 3.2%, making them worth considering for a diversified portfolio of income shares.

I expect Rio’s and BHP‘s dividends to continue to grow over the next few years, as both companies have said they will cut back capital expenditure on new projects, and focus on maximizing their profitability and enhancing shareholder returns.

What’s next?
Analysts’ forecasts are notoriously unreliable, but FTSE 100 companies generally get the benefit of the most comprehensive analysis, and tend to deliver fewer surprises than smaller companies.

With that in mind, let’s take a look at the forecasts for Rio Tinto and BHP Billiton. These apply to the companies’ current financial years, which end in June (BHP) and December (Rio):

 

Rio Tinto

BHP Billiton

Forecast P/E ratio

7.2

11.3

Forecast dividend yield

3.7%

4%

Forecast dividend growth

6.3%

5.2%

Forecast earnings growth

26%

(32.0)%

These figures, which are based on the companies’ guidance figures and analysts’ forecasts, suggest that Rio may be nearer the end of its consolidation phase than BHP, which is expected to deliver another year of disappointing earnings.

It’s worth taking a brief look at the main commodities produced by each company. Around 75% of Rio’s earnings come from iron ore, while the remainder is split between aluminum, copper and coal.

In BHP‘s case, around 50% of earnings from iron ore, while around 25% comes from oil and gas production, mostly in the U.S. The remainder comes mostly from copper, aluminum and coal.

Which share should I buy?
BHP‘s major commitment to oil and gas is something to consider if you want a diversified portfolio, as it could take you overweight on oil if you also hold shares in a supermajor like BP or Royal Dutch Shell.

On the other hand, BHP does offer exposure to all the major industrial commodities in one share, which may be attractive, depending on your requirements.

I prefer Rio’s focus on mining, rather than petroleum, and I like its growing emphasis on copper. For all of these reasons, Rio is my pick as a buy — but I

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Steel Yourself for Change at Rio Tinto

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By Rich Duprey, The Motley Fool

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Having a finger in many pies is no longer the way Rio Tinto wants to operate anymore. It may have had diversified mining interests in the past, but new management has it focused on just one task now, and it is quickly putting up the “for sale” sign on anything that doesn’t align with that vision.

Down the mine shaft
After posting its first-ever full year loss in February — and a $3 billion one at that — newly hired CEO Sam Walsh is set on doing what’s necessary to turn the miner around, and that apparently means jettisoning everything that doesn’t make it money.

While iron ore has always been Rio’s biggest operation, accounting for nearly half of its $51 billion in annual revenues, it’s also been its sole money maker generating 80% of its pre-tax profits. It’s natural that iron ore will be what’s left after it sells off a lot of its other assets. It recently announced its intention to put a shingle out for its Australian coal assets and its hired advisors to find a buyer for its copper and gold mines down under. Its aluminum mining business has been up for sale for two years now.

BHP Billiton finds itself in an extremely similar situation: a new CEO and plans to divest itself of non-core assets. Analysts think the miner could realize as much as $25 billion from a sale while Rio Tinto may be able to book $10 billion or more. BHP has already sold off some $4.5 billion worth in four sales since last August and has idled a handful coal operations in recent months.

A dirty word
Coal is just not a healthy business. Consumption in the U.S. fell by 11% in the fourth quarter of 2012, according to the Energy Information Administration, while production was down 12%. Some 90% of coal gets burned to produce power, yet electricity use is down 2% over the past five years. Even so, the shale natural gas boom has made natural gas more competitive just as coal was looking cheap. Without the same stigma associated with it as coal, natural gas has led more utilities to switch from coal-fired plants to gas-fired ones, with tthe pace of divestiture is quickening.  

Dominion Resources agreed just last month to sell interests in three power plants to private equity, while Ameren is unloading five coal-fired plants to Dynegy.

Yet Rio Tinto‘s bet on iron ore isn’t a slam dunk, either. Goldman Sachs recently forecast falling prices as demand and steel production drop in China, the largest market for iron ore and Rio’s biggest geographic segment. Ore imports fell to 56 million tons in February, down from 65 million in January. Cliffs Natural Resources is idling an iron ore pellet plant in Canada because of falling prices.

The admonition to do one thing and do it well just might not be the salve that Rio Tinto needs to …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Iron Ore About to Get Mauled by Bear Market

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By Rich Duprey, The Motley Fool

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Could the timing be any worse? Just as Rio Tinto and BHP Billiton are shedding assets to focus more intently on their iron ore business, analysts at Morgan Stanley say the whole industry is about to get dusted from a supply glut. It anticipates that inventories will widen next year and expand through 2018, causing prices to tumble by more than a third just this year alone.

Hitting the brakes on the Orient Express
Of course, the miners aren’t helping themselves, as each is bringing new mines online in Australia, along with top iron ore miner Vale opening one up in Brazil. Even though China‘s steel mills still have a voracious appetite when it comes to the ore, analysts expect that industry output will grow by only 2.6% this year, so it won’t be enough to offset rising surpluses. Even China‘s own development and economic planning agency says the country will experience a surplus of 20 million tons, as it will import only about 4% more than it did last year.

China‘s economic growth has been slowing, and even though economists predict that GDP will expand beyond 8% this year, that’s still a good deal below the better than 10% annual growth it’s enjoyed for the past decade.

Anticipating the weak market, Cliffs Natural Resources announced last month that it will idle its Wabush Pointe Noire pellet plant in Sept-Iles, Quebec, by the end of the second quarter of 2013. One analyst frets that it will also need to sell its Australian iron ore assets to help pay down some of the $3 billion worth of debt it carries on its balance sheet.

The end is nigh
Morgan Stanley says 2013 will actually experience a supply deficit of around 81 million tonnes of iron ore, but next year it will grow to a 3.3 million tonne surplus and continue widening until it is 291 million tonnes in 2018. 

Factors that might mitigate when, or even if, the glut materializes include the length of time it takes to bring new mines online, but perhaps more crucial will be India‘s turning from a net exporter of iron ore into a net importer. The Wall Street Journal reports that mining interests in the subcontinent worry that they won’t be able to export anything because the country’s Supreme Court keeps rolling out export bans during a probe into illegal mining.

Despite all the doom and gloom, iron ore prices at $139 a ton have held up remarkably well, but Bloomberg believes that based on consensus analyst estimates, it could hit $90 a ton by year’s end.

Iron Ore Spot Price (Any Origin) data by YCharts.

Down a mine shaft
Shares of miners have not fared as well, with BHP down 15% from its 52-week high, Rio off 22%, and Vale losing a quarter of its value. Cliffs has performed the worst of the bunch, with its stock down more than 72%. 

If the industry holds even …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

3 Attractive Natural Gas Acquisition Targets

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By Tyler Crowe, The Motley Fool

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Several major integrated oil and gas companies are in a rough spot — they just can’t seem to meet production goals. In 2013, ExxonMobil expects total production to decline by about 1%, and it isn’t the only one hurting. The one distinct advantage these big oil companies have is a mountain of cash to buy a company or two. It is the fastest way to get a boost in production without rolling the dice on a new speculative play.

The one risk a company has with an acquisition is that it could overpay for the asset, and then the production gains would be offset by the price tag. Let’s take a look at a simple calculation that can help evaluate the value of a company, and then see what natural gas companies could be had for a deep discount.

Getting bang for your buck
While there are certainly some very complicated methods for evaluating an energy company, a quick and dirty method is to see how the enterprise value of the company (all equity and debt minus cash) compares to the total proved reserves on the company’s books. For example, when BHP Billiton bought independent gas company Petrohawk back in 2011, it paid $12.1 billion for a company that had 3.4 trillion cubic feet of natural gas in proven reserves. This means that the company paid about $3.55 per thousand cubic feet of natural gas for the company’s reserves. Based on an S&P Capital IQ screen of exploration and production companies with a total enterprise value of $1 billion-$15 billion, an average company in this space would have an enterprise value per thousand cubic feet equivalent of $6.65. So based on this metric, its seems as though BHP got a pretty good deal.

Since oil and gas price spreads have deviated so far from a BTU-equivalency basis, its not as effective to use this metric when evaluating oil-heavy companies. If you want to do your own calculations, be sure to use per-barrel oil equivalency for oil-heavy companies. Also, If you want to see a couple liquids-heavy assets that could be acquisition targets, click here. Based on this calculation, here are three natural gas companies trading at a deep discount:

Ultra Petroleum
Ultra certainly hasn’t seen any love lately. Natural gas prices have fallen, and so has the share price of Ultra. Despite being one of the low-cost producers in the space, Ultra has an enterprise value per thousand cubic feet equivalent of about $1.67. Not only is the company valued much lower than its peers, but it’s value is less than half of what a thousand cubic feet of natural gas trades for at the Henry Hub spot price. 

What is even more surprising about this low price tag is that the company may be sitting on much, much more gas than what is on its proven reserves. The company has just barely begun to tap its 260,000 acres in the Marcellus Shale, …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

3 Things to Love About BHP Billiton

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By G. A. Chester, The Motley Fool

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LONDON — There are things to love and loathe about most companies. Today, I’ll tell you three things to love about the world’s biggest miner, BHP Billiton . I’ll also be asking whether these positive factors make BHP Billiton a good investment today.

Size and spread
BHP Billiton is not only the world’s biggest mining company, but it’s also the most diversified. Over the past three years, in broad terms, group revenue breaks down more or less equally three ways: iron ore, other metals, and petroleum and coal. Geographically, China is the largest market, supplying close to 30% of group revenue, but the remaining 70% comes from far and wide.

No miner can insulate itself from commodity prices, and BHP is no exception. However, with its early , mid-, and late-stage cycle metals; its diversification into oil and gas; and its wide geographic markets, the group is more resilient than its peers.

Boardroom
There have been fireworks in the boardrooms of BHP‘s Footsie rivals of late: Cynthia Carroll, boss of Anglo American, departed under shareholder pressure with no successor in place; Tom Albanese left Rio Tinto with equal abruptness under the cloud of a $14 billion asset writedown; and Xstrata chief Mick Davis is ceding control to Ivan Glasenberg of merger partner Glencore.

In contrast, BHP‘s announcement of the retirement of Marius Kloppers and the naming of Andrew Mackenzie as his successor was made amid little fuss. Was there just a teensy bit of salt-rubbing into rivals’ wounds as BHP referred to a “planned and considered” succession process that “has served the company well for over a decade”?

Kloppers’ tenure at BHP wasn’t faultless, but having taken up the job in October 2007, he did relatively well through a tough period. The company’s shares increased 18% on his watch, compared with hefty falls for Rio Tinto (23%), Anglo American (44%), and Xstrata (66%).

Dividends
BHP‘s new chief executive had been appointed by Kloppers in 2008 to lead the group’s nonferrous-metals business — the division from which Kloppers himself had graduated. While Mackenzie brings continuity, he has also promised productivity, capital discipline, and more emphasis on returning cash to shareholders. That’s good news for investors, because BHP‘s dividend record is already decent compared with those of its peers.

Since 2008 the dividend has grown from $0.70 to $1.12. As things stand, at a share price of 2,054 pence, BHP offers a 12-month forward yield of 3.8% — the highest income of all the Footsie’s big miners and above the average of the wider market, too.

A good investment?
I’ve just mentioned how attractive BHP‘s yield is, particularly given the new CEO‘s words on returning cash to shareholders. The price-to-earnings ratio and earnings growth also appear attractive once you look past the company’s current year-end of June 30. The P/E for the year ending June 2014 is forecast to be about 10, with analysts having penciled in earnings growth of some 30%.

Buying …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

3 Shares to Race Ahead of the FTSE 100

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By G. A. Chester, The Motley Fool

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LONDON — The FTSE 100 is on a terrific bull run, finishing today’s trading session at 6,529 points after soaring 16% in four months.

I don’t think you necessarily have to back risky recovery stocks or speculative small caps to outperform the market if this bull run continues. I reckon three companies that are giants in their respective sectors should do well — not perhaps delivering the outsize returns that some poorer-quality companies will notch up (if you can pick the right ones!), but returns ahead of the market all the same.

My three for a continuing bull run are: mining giant BHP Billiton , banking behemoth HSBC , and heavyweight asset-manager Schroders .

BHP Billiton
If the stock market bull run is to have real legs, it will require a truly improving economy. Stocks can’t go higher indefinitely on sentiment alone. A global economic recovery will inevitably be allied to demand for resources in China and other industrializing countries. Step forward, mining giant BHP Billiton.

All miners had a poor 2012, dogged by weak prices and rising costs. But analysts are tentatively penciling in improving revenues and earnings going into 2014. In BHP Billiton’s case, after it took an earnings hit of more than 40% during the first half of the current year, the City expects the decline to have moderated to about 30% by the company’s June year-end.

For fiscal year 2014, the consensus is for BHP‘s earnings to rise about 30% — and this forecast has been ticking up from where it was three months ago. At a current share price of about 2,100 pence, you’re paying not much more than 10 times forecast FY 2014 earnings.

HSBC
Valued by the market at more than 130 billion pounds, HSBC is more than three times the size of its nearest Footsie banking peer, Standard Chartered.

While the fortunes of Standard Chartered, Royal Bank of Scotland, Lloyds Banking, and Barclays are all — to a greater or lesser degree — tied to the economies of a single country or region, HSBC is a truly global giant with revenue well-balanced between Europe, the Americas, and the Asia-Pacific region. As such, HSBC is poised to thrive in a recovering world economy.

A current price-to-book value of 1.3 may not sound too attractive, but HSBC‘s net assets are forecast to increase rapidly over the next couple of years. If the group makes analyst estimates of 660 pence per share in net assets by the end of 2013 and the market ups its P/B rating to two (let’s not forget the P/B was between 2.5 and three before the financial crisis), then HSBC‘s shares could trade at more than 1,300 pence compared withabout 725 pence today.

Schroders
The reason why an asset manager such as Schroders can be expected to race ahead in a bull market is really quite simple. If Schroders can increase assets under management and keep the cost base low, the …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Glencore Follows Other Big Miners to Lower Profits

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By 24/7 Wall St.

mining

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London-traded Glencore International has been making news for more than a year now for its takeover of Xstrata, a mining company of which Glencore already owns about 40%. The company is awaiting approval from Chinese regulators and now expects the deal to be done by mid-April.

In the meantime, Glencore reported preliminary results this morning for its 2012 fiscal year. Like BHP Billiton Ltd. (NYSE: BHP), Rio Tinto PLC (NYSE: RIO), Anglo American, Barrick Gold Corp. (NYSE: ABX), Kinross Gold Corp. (NYSE: KGC) and Newmont Mining Corp. (NYSE: NEM), Glencore took a big write-down on a mining property: a $1.2 billion impairment charge on a reclassification of an earlier charge for the company’s investment in Russian aluminum giant Rusal. All told, Glencore wrote down $1.65 billion in impairment charges last year.

The company’s commodity trading business helped offset the weakness in commodity prices, and Glencore managed to post an adjusted profit that was 25% lower than profit in 2011, but that exceeded an analysts’ forecast for a drop of 37%. Operating profit in the company’s trading division rose 11% and fell 27% in its industrial division.

For Glencore, only gold showed a positive commodity price change in 2012, up 6%. The largest negative changes were visited on nickel and iron ore, both down 23%. And Glencore nearly doubled its production of iron ore, while gold production fell by 1%.

Glencore’s report is available here.

Shares in London are trading up about 3.1% this morning, at 381.45 pence.

Filed under: 24/7 Wall St. Wire, Commodities & Metals, Earnings, International Markets Tagged: ABX, BHP, KGC, NEM, RIO

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Source: FULL ARTICLE at DailyFinance