|The BHP Billiton Limited (ASX: BHP) share price has so far managed to rebound 1.6% today following yesterday’s sell-down. The BHP share price is now fetching $24.30, compared to a recent high of $27.95.
BHP Billiton has been one of the market’s top performing blue chip shares over the past 12 months, lifting around 38% during that time. Although it started 2017 on another high note however, the BHP share price has since taken a turn for the worse and is trading 3% lower since the year began.
The reason for yesterday’s decline appears to have been a sharp fall in the price of both iron ore and oil – both of which BHP produces. The iron ore price fell 4.3% on Tuesday and another 3% overnight to just under US$85 a tonne, according to The Metal Bulletin, while oil prices were trading 0.6% lower as well.
Although commodity prices are prone to fluctuations, the movements over the past two sessions are bound to make some investors in the sector anxious. After all, both iron ore and oil have skyrocketed in price since bottoming out in early 2016. But with particular regards to iron ore, there are some predictions that suggest a sharp decline is in store for the commodity before the end of 2017 which has the potential to drag heavily on the BHP share price, together with the share prices of rivals Fortescue Metals Group Limited (ASX: FMG) and Rio Tinto Limited (ASX: RIO).
For instance, The Australian Financial Review recently reported:
“However, for all that commodity’s price gains defied predictions in 2016 and early 2017, many analysts now believe new supply, high inventories, and insufficient demand are setting iron ore up for sharp losses in the second half of this year.”
Now, BHP is one of the lowest cost producers in the world, as are Rio Tinto and Fortescue. But falling iron ore prices would still have an impact on their margins and hence, their ability to generate stronger returns for shareholders.
Because of its diversification, its long operating history and its lower costs, BHP is justifiably one of the first miners investors should look at for exposure to the sector. But after its strong run, and the risk of a pullback in commodity prices this year, investors ought to approach with caution.|
|I thought of dumping this at 1600 but I knew it would come back.
Of course, if I'd known just how low it would go I'd have sold and bought back, but my crystal ball's been out of commission for a long time.|
|By Bilaal Mohamed:
To say the last few years have been challenging for global mining giant BHP Billiton would be a gross understatement. The world’s biggest mining company has seen both its revenues and earnings in a steep decline since 2011 as the slowdown in China has led to a significant fall in commodity prices.
Last year the Anglo-Australian mining giant posted enormous losses of $6.4bn, the highest in the company’s history, as the global slump in commodity prices and the Samarco mine disaster in Brazil took their toll. As a result, the company slashed its final dividend payout to 14¢ per share, a massive 77% cut from the 62¢ per share it declared the previous year. This left the full-year payout at 30¢ per share, some 76% lower than fiscal 2015.
However, last month’s interim results made for much better reading. Attributable profit came in at $3.2bn for the first six months of the year, compared to a loss of $5.7bn for the same period in 2015/16. The turnaround in fortunes was attributed to a recovery in commodity prices and stronger demand from China. There have also been major efficiency gains, with a further $1.8bn worth of savings expected through to the end of 2017.
Getting into shape:
In recent years the diversified mining giant has been forced to cut back on some of its capital investment programmes, sell assets and strengthen its balance sheet. Many believe that the worst may be over for commodities, but come what may, BHP is certainly in better shape to tackle whatever the future may hold for commodities prices.
From an investment perspective, BHP is certainly a lot more attractive than it has been for a long time. Despite a strong rally since the start of 2016, at around £12.45 the share price is still a long way below its 2011 peak of £26.31. The valuation isn’t too demanding either, with a forecast P/E of 11.7 for the current year to the end of June.|
|Because the shares have gone ex-dividend.
The rest of the decline can be attributed to a broad sell-off in the energy and materials sectors. Both sectors are down around 2% today thanks partly to a slump in oil and iron ore prices.|
|What's going on today? Why the 4.5% drop?|
|What a load of TOSH our City boys speak............no mention of free cash flow and how this is used..................look at what is going on in the industrial world and not just China............look at what is going on in India and now the EU as growth slowly picks up.........get off your backside and go see what the pit face is doing.....driverless trucks in OZ and very very low cost extraction which the company does not mention.
Every dividend I have had from them over the past 3 years has gone back into buying more shares and that makes you capital.|
|Analysts at Liberum pointed out that BHP ‘delivered a small beat to consensus earnings’.
But, in a note to clients, they added: “Whilst the short-term demand outlook is solid, we remain cautious on expected commodity price moves from Q2 as Chinese cooling measures impact demand and supply continues to grow, in iron ore in particular.”
Andy Forester, senior investment officer at fund manager Argo Investments, said that he was comfortable with the dividend.
“They’re just being pretty disciplined at the moment,” he said. “Everyone̵7;s still cautious on how sustainable this uptick’s going to be.”
"Clearly BHP are reasonably confident on where iron ore prices are at the moment. The balance sheet gearing has come back down."
George Salmon, equity analyst at Hargreaves Lansdown said investors shouldn't ignore the group's excellent progress on cost control. In the long term, Salmon said BHP has "some of the lowest cost assets out there" and a "rapidly improving balance sheet".|
|By Peter Stephens:
While BHP’s first-half results were an improvement on those from the same period a year earlier, it was unlikely they would get any worse. After all, the company reported a loss of over $7bn in the first half of 2015. This time around, it made a profit of over $6bn and seems to be well-positioned to grow its bottom line over the medium term.
To do this, BHP has restructured its asset base so that it now consists of large, long-life and low-cost assets. They have benefitted from a constant drive towards greater efficiency and productivity, which is starting to bear fruit. At the same time, the company has been able to reduce leverage and de-risk its operations. For example, its first-half results showed that net debt fell from $26.1bn in June 2016 to $20.1bn at the end of the most recent period. At a time when interest rates in the US are moving higher, this seems to be a logical move.
In the current financial year, BHP is expected to return to profitability and record earnings of 103.8p per share. This puts it on a forward price-to-earnings (P/E) ratio of 13.5. This may not sound particularly cheap on a standalone basis, but when compared to the company’s historic average P/E ratio it indicates there is upward rerating potential. In the last five years, BHP has traded on an average P/E ratio of 20.6. Therefore, a significantly higher rating than that applied by the market at the present time could be on the horizon.
When coupled with its lower risk profile, this indicates that the company is a sound long-term buy. It has a diversified and highly efficient asset base, is now in profit and could grow its earnings at a rapid rate if commodity prices remain robust. As such, further FTSE 100-beating performance could lie ahead.|
|Shares in BHP Billiton (LON:BLT) were up 1.6% in London after a strong set of results in which it set out plans to buy back US$2.5bn of bonds and said it would more than double the interim dividend.
The pay-out of 40 cents a share comfortably beat expectations and also Goldman Sachs’ high-end figure of 36 cents.
“Overall this was a strong set of results,” said Goldman in a note to clients.
BHP posted a 65% jump in underlying earnings (EBITDA) to US$9.9bn for the six months to December 31, up from US$5.99bn a year earlier.
Goldman said guidance for the remainder of the company’s financial year was largely unchanged, although it noted costs had nudged a little higher largely to due to foreign exchange rate factors.
“We expect the stock to trade positively post today’s announcement, especially given the strong movement in commodities overnight,” the Wall Street bank said.
Goldman reckons they are worth 1,550p each, and it is sticking with its ‘neutral’; recommendation.
Of the 15 analysts logged as following BHP by the Broker Forecasts site, eight are in the ‘neutral’; camp. There are four ‘sellers’; and just three analysts hold ‘buy’ recommendations.
The consensus price target, 1,000p six months ago, is currently 1,261p, which reflects a degree of caution over the outlook for the miner and its shares.|
BHP Billiton has released robust interim results as the strong recovery in bulk and base metal commodity prices offset production weakness in petroleum, copper and thermal coal. Group revenues for H1 FY 2017 were up 20% YoY to US$15.7bn driven primarily by the recovery in prices in iron ore, copper and coal. Underlying EBITDA of US$9.9bn was up 65% primarily as a result of the strong top line. EBITDA in the iron ore division was up from US$2.8bn to US$4.2bn while in copper EBITDA was up from US$0.8bn to US$1.7bn and US$0.2m to US$2bn in coal.
Net debt decreased from US$25.9bn to US$20bn owing to a 38% reduction in capex to US$2.7bn combined with the significant recovery in earnings.
BLT has announced an increase in exploration spending for FY 2017 and 2018 by around US$400m.|
|IC: Like its iron ore peer Rio Tinto, BHP Billiton (BLT) has rewarded shareholders with a bonus 10¢ a share pay-out following a very profitable second half of 2016. The special dividend, which comes on top of the 30¢ basic interim return, was helped by a quadrupling in earnings before interest and tax, to which higher sales prices and lower costs in each of BHP’s four key commodities were big contributors.
BHP pay a 50% payout.
Ex - 08 March
Currency Conversion - 10 March
Paid - 28 March|
|Exactly - focus on the FREE CASG FLOW - if EV/EBITDA ratings hold then there is great scope for equity performance as debt is paid down|
raffles the gentleman thug
|and it came to pass that the price was reflecting good news all along............
Focass on the FREE CASH FLOW...............that is what is going to make the price pick-up again.|
|What to expect in BHP Billiton earnings By Rhiannon Hoyle:
EARNINGS FORECAST: An underlying profit of US$3.14 billion is the median of six analyst forecasts compiled by The Wall Street Journal. A year ago, BHP reported an underlying profit of US$412 million.
DIVIDEND: An interim dividend of US$0.31 a share is forecast, up from 16 cents a year ago.
WHAT TO WATCH:
--DEBT VS DIVIDEND: With earnings tipped to have bounced back, thanks in a large part to higher commodity prices, investors want to see what BHP plans to do with its extra cash. Analysts broadly tip debt reduction to remain a priority over dividends (despite forecasting a rebound in cash payouts from a year ago). "We expect the focus to be on cash generation and debt levels as opposed to capital management," Macquarie said in a Feb. 20 note.
--PRODUCTIVITY PROGRESS: Even as commodity markets recover, miners have promised to keep productivity plans front and center. At the start of this fiscal year, BHP pledged to find another US$1.8 billion in productivity gains and the market will be seeking a progress report on that goal. At an investor meeting in October, Chief Executive Andrew Mackenzie said the miner "will build on our momentum and strong culture of safety and productivity to create significant future value" for shareholders.
--CAPITAL EXPENDITURE: Deutsche Bank says its analysts will be looking for "any changes to fiscal-year 2017 capex guidance of US$5.4 billion, including revisions to the U.S. Onshore [division] budget of US$600 million." Also in focus will be any further details on the timing of BHP's Spence Hypogene copper project, Caval Ridge coking coal expansion and Jansen potash development.|
|By Reuben Gregg Brewer:
January was a solid month for gigantic diversified miners Vale SA, Rio Tinto and BHP Billiton. Investors watched this trio, each of which has a heavy focus on iron ore, advance by 26%, nearly 15%, and roughly 12%, respectively. That continued the trend from 2016, when Rio and BHP advanced 32% and nearly 39%, respectively, and Vale rocketed a massive 130%.
There was a lot going on in January. The first thing to look at for the trio was the rising price of iron ore, which is a huge contributor to the top and bottom lines of all three of these miners. So the 3.6% monthly rise in that metal's price was helpful. But there was more going on than just that, with strength throughout the commodity market. For example, copper, another key product for each, was up around 8% in January.
So supportive commodity markets were an important element in in the January advances of Vale, Rio Tinto, and BHP. But last month was about more than just commodity prices. For example, Vale and BHP took an important step forward in clearing up the uncertainty surrounding the Samarco Mine disaster. And Rio Tinto managed to offload some Australian coal assets. These were big, important moves, too.
Gigantic miners such as Vale, Rio, and BHP have benefited from the broad upturn in commodity prices that started in 2016. That's spilled over into 2017, but you have to look beyond that headline to understand what's going on at each of these companies.
If you're seeking a gigantic miner with a heavy focus on iron ore, each of these three companies will fit the bill. However, with Vale and BHP still facing Samarco uncertainty until at least June, Rio Tinto should probably be the top option on your list right now. It may not be the one you choose to buy; however, it appears relatively well situated as the new year gets under way. But whatever you choose to do, make sure you dig in past commodity prices so you have a better understanding of what's really going on at these gigantic miners.|
|Why Commodities Are Set To Offer More Than Just High Volatility In 2017:
The best word to sum up the performance of commodity prices in recent years has been 'volatile'. Their prices have swung violently and left many resources companies and investors nursing heavy losses at times
For example, since Donald Trump's election victory the price of gold declined by as much as 13%, while during the same time period the oil price has risen by 12%. Similarly, iron ore is up over a third from three months ago and has left behind a trail of considerable volatility.
Looking ahead, commodities could continue to be volatile. After all, the outlook for the global economy is highly uncertain. However, they may also offer significant profitability for those investors who are able to buy and hold through what may prove to be yet more yo-yoing prices.
Supply and demand:
Clearly, commodity prices are always heavily dependent upon changes in supply and demand. In the case of oil, the outlook for 2017 is relatively positive. OPEC agreed in November to reduce production by 1.2m barrels of oil per day.
This was somewhat surprising and was followed by a cut among non-OPEC members. Although demand growth has been somewhat sluggish in recent years, the imbalance between demand and supply is expected to narrow in the coming months.
In fact, the International Energy Agency (IEA) predicts the current oil surplus will become a deficit before the end of the first half of 2017. Given that forecast, it seems likely that the oil price will continue to move higher in the short term at least. Therefore, it would be unsurprising for oil-focused companies to record strong returns in the coming months.
An uncertain outlook:
While the price of gold came under pressure following Trump's election victory, it has recovered strongly in 2017. It is up 3.5% since the turn of the year and it could keep rising during the coming months.
A key reason for this is the high degree of uncertainty that faces the global economy. In the US, Trump's economic policies are likely to include significantly higher spending on infrastructure, coupled with lower tax rates.
The effect of this is likely to be higher rates of inflation which the Federal Reserve may or may not be able to slow down through higher interest rates. During periods of a rapidly rising price level, demand for gold increases because it is seen by many investors as a store of wealth.
In addition, gold's outlook could be positive because of uncertainties in Europe. The precious metal's status as a defensive asset may come into play as Brexit negotiations start within the next nine weeks.
French elections could also increase the attractiveness of risk-off assets such as gold. Similarly, a slowdown in China's growth, caused by a more protectionist global economy, may also cause gold's price to rise this year.
A changing China:
While gold and oil offer clear catalysts for price growth, iron ore's future is somewhat more opaque. It has benefited in recent months from the Chinese government's stimulus programme, as well as continued rising steel production in the world's second-largest economy.
Furthermore, the mothballing of various large projects within the iron ore industry has caused investors to anticipate a more favourable price in the long run, given the current relationship between demand and supply.
However, the reality is that China's economy is not only slowing, it is also transitioning. It is currently the largest importer of iron ore in the world, but its move away from infrastructure-led growth and towards consumer-led growth could mean demand for iron ore falls in the long run.
Therefore, while the iron ore price could rise in 2017, it is perhaps less likely to do so than other commodities such as oil and gold.
While commodity prices could remain volatile during 2017, they also offer the potential for high profits. Therefore, investors who are able to live with prices that lack the consistency and stability of shares in other sectors may have an opportunity to benefit.
Certainly, the outlook for gold and oil is relatively positive. In gold's case, it could benefit from the uncertainty which looks set to be a key feature of 2017.
Similarly, oil's price could respond positively to demand catching up to supply over the coming months. While iron ore's future may be less attractive than that of oil and gold, lower than expected supply and increasing steel production in China could push its price higher during the course of the year.
As such, now could be a good time to buy shares in resources companies. Due to the high volatility and falling commodity prices in the past, wide margins of safety and low valuations appear to be on offer. While paper losses seem likely to be recorded at times during the year, by the end of 2017 there could be a tidy profit awaiting those investors brave enough to buy resources companies now.|
|By Owen Raszkiewicz - Rio Tinto and BHP Billiton are two of my favourite mining companies, but I would not buy their shares today.
The share prices of BHP Billiton and Rio Tinto have rallied over the past year.
Given both companies are resources businesses focused on producing commodities such as iron ore, coal, copper, oil (in BHP’s case) and aluminium, both companies’ share prices have soared in response to an increase in market prices.
Indeed, every single one of those commodities has rallied over the past 12 months. Iron ore, for example, is up over 101%.
The basis for the gains in iron ore, coal, copper and aluminium are often attributed to China’s huge stimulus packages.
In 2015, China upped its stimulus to 17.6 trillion Yuan — the equivalent of $US 2.56 trillion (with a ‘t’). Still, its deficit widened.
For comparison, Donald Trump’s election campaigning promised $1 trillion on infrastructure spending over 10 years. Some anecdotal evidence suggests that it is the equivalent of what China spent in nine months in 2016.
Another boost to BHP’s share price is the rally in oil prices. This has come about because OPEC, a group of countries whose economies depend on oil to reach break-even, finally agreed that enough high-cost producers from the U.S. shale oil fields were forced out of the market and decided to cap production. OPEC capped production so prices would rally. And they have.
In summary, you can see why Bloomberg, Sky News, CNBC and every other financial news channel devotes so much of their time to understanding political decisions from China, the USA, OPEC and the rest.
That’s too difficult for me.
What I’m trying to emphasise here is that while Rio Tinto and BHP Billiton are more likely than most to weather a downturn in commodity prices — they are heavily leveraged to the industry by nature and design. That means, if commodity prices fall, their share prices could also head south — and quickly.
If I were to pick one, I would choose BHP. But like I said at the beginning of this article, I’m not a buyer of any of them. And if I held shares I would want to make sure I’m not overexposed to the sector throughout 2017.|
|Australian minister - bloomber
POssible 10% rise in minals/metal / commodoties
extraction is the key [point now|
|Meant to say $5-10 a barrel from last update|
|BHP Billiton and its partner Vale will settle a multi-billion Samarco dam disaster claim within the next five months after agreeing to the nuts and bolts of a deal with Brazilian prosecutors who had set a 30 June deadline with federal prosecutors in Brazil to settle a $47.5bn (£38bn) claim related to a dam failure in November 2015 which killed 19 people.
BHP Billiton, Vale and Samarco will initially pay 2.2bn reais ($675m) to support compensation and social and environmental remediation of the dam failure.
This comprises a charge over Samarco's assets of 800m reais ($245m), insurance bonds of 1.3bn reais ($400m), and liquid assets of 100m reais ($30m).
If the final settlement is not agreed by 30 June, then the prosecutors may request an injunction of 1.2bn reais ($370m) injunction.
The deal with the federal prosecutors also requires the companies to advance reais 200m ($60m) of the funding to programs for the municipalities of Barra Longa, Rio Doce, Santa Cruz do Escalvado and Ponte Nova.
The companies’ ultimate aim is to barter prosecutors down to a compensation figure some way below £38bn.
Prosecutors in Brazil have past form in demanding vast damages but settling for far less: in 2013, Chevron agreed to pay a $135m fine for an offshore oil spill, having initially faced claims for $18bn.
In the Samarco case, prosecutors based their number on the clean-up costs of the Deepwater Horizon oil spill in 2010, saying the “human, economic and environmental impacts” are “at least equivalent to those observed in the Gulf of Mexico”.
Under the latest agreement, the miners will seek to roll the prosecutors’ claim into a separate deal struck with the government last year, under which they agreed to pay at least $2.3bn to fund a foundation that would restore the local environment and compensate victims.
The so-called “framework agreement”, which was signed by former president Dilma Rousseff in a high-profile press conference last March, was suspended by the courts as the prosecutors’ claim was heard.
While the preliminary agreement means BHP is a step closer to drawing a line under the Samarco catastrophe, uncertainty remains over the size of the final settlement. BHP has so far set aside $1.3bn to cover the costs of the accident.
"It is good that they have agreed a way forward but we really have to wait and see what the total cost and timing of the restart is before getting too excited," said Myles Allsop, an analyst at UBS.
A group of Samarco employees still face criminal charges over the accident, and the restart of the mine, which was a major employer in the region, is up in the air.
Fernando Coelho Filho, Brazil’s mining minister, said in a speech at Davos this week that he expected Samarco to resume operations within two months, but industry experts believe this unlikely, as the mine must wait for a number of environmental and safety licences.
A report by New York law firm Cleary Gottlieb last year blamed the dam’s collapse on tweaks to its design, which resulted in water seeping into the infrastructure and “liquefying221; its foundations.|
|Shares of mining heavyweight BHP Billiton Limited (ASX: BHP) enjoyed a stellar year in 2016 and are off to a flying start again in 2017. While the shares have risen 1.3% today alone to trade at $26.36, they have gained an impressive 5.2% since they traded for $25.06 at the beginning of the year.
As has been the case with various other miners, including Fortescue Metals Group, Rio Tinto and Whitehaven Coal, BHP’s resurgence can largely be attributed to a lift in the price of iron ore and coal. Oil prices have rebounded nicely too, providing plenty of drive for the BHP Billiton share price.
If commodity prices continue to rise, or even if they remain stable at their current levels, BHP’s shares could have further to run. That said, investors do need to be aware that further capital gains from the stock (and indeed, dividends as well) will be largely dependent on that happening: if commodity prices decide to fall again, it could put a real dent in BHP’s prospects.|
|Was the right call. Top slice a few.|