BHP Billiton Share Discussion Threads

[loganair] 11/1/2016 17:01

By Kevin Godbold - A year ago, many were attracted to the big mining firms because of high dividend yields and low forward price-to- earnings ratios.

BHP Billiton, Rio Tint and Anglo American looked attractive on traditional valuation measures. However, I was bearish on the firms and explained why in an article published on 12 January 2015.

Today, with the shares of those firms much lower than they were a year ago, I’m still bearish and think it’s too soon to revisit the sector. The crucial ‘buy’ signal is missing today, just as it was a year ago.

What signal?

The thrust of my article last year was that it’s better to think of the miners as cyclical firms through-and-through. What their businesses produce has low differentiation and little added value. As such, the commodity companies have almost no pricing power.

The problem with cyclical firms for investors is that valuation indicators tend to present upside down. The big miners can look the most attractive on valuation grounds just at the point when they’re the most dangerous – just before the next profit and share price collapse, as we’ve seen lately. It’s therefore risky to justify an investment through the lens of traditional value or income measures.

Instead, it makes sense to me to wait for the signal of momentum before buying. At the very least, I want to see flatlining charts for the big miners’ share prices and for the underlying commodities that they produce. Ideally, the charts will be turning up, providing evidence that the bottom of the fall in prices might already have occurred.

Beware false signals:

I would argue now that a return to the big miners is an investment decision that has no urgency. I’m not expecting the miners to snap back up fast, so I’ll look for evidence of a turn in the commodity markets over months, perhaps even years, rather than weeks. I was wrong, for example, to wonder whether it was time to buy the miners in a second article published on 4 February 2015. That was a false signal, although I did urge caution even in that article. Fortunately, despite wondering whether the time was right, I didn’t buy any miners’ shares in February last year.

When I look at the share price charts today of miners such as BHP Billiton, Rio Tinto and Anglo American, and at the price charts for commodities such as iron ore, oil and copper, I still see a downtrend over a one-year period. To me, that means the crucial ‘buy’ signal for the mining companies is still missing, just as it was a year ago. When it comes to investing in the big mining companies, I think it seems likely that the best strategy from here is one of slothfulness.

Even then, I would argue, the big miners are for trading to try to catch the upturn after a cyclical bottom.

[idioterna] 11/1/2016 16:29

..and that will be another happy buy at $21,35. I'll bet my broker squeals when I ask for those as paper certificates. It's hilarious to see the dividend coupon is worth so much more than the loan coupon.

Thanks and goodnight.

[loganair] 09/1/2016 13:40

Darias - I do not mind any poster posting their opinion of where they think a particular companies share price is going, however to post this on a daily basis and nothing else and with no real back ground information of why they think the share will be at that price to me just a waste of my time and energy a sounds too much like the ranting's of my young son.

[darias] 09/1/2016 11:01

>>ARJA

I consider that there are many reasons for filtering someone not just swearing. "Digital Diarrhoea" is obviously one of them but it seems to me that Loganair is suffering from this more than Rickmay. If either was seriously ruining the thread I would certainly filter them but the thread, at present, is fairly clear unlike SXX where I have filtered the majority of posters.

[careful] 08/1/2016 20:38

i hope they do not reduce the 12% dividend.
it seems a sensible payout at just the right level.

[arja] 08/1/2016 19:52

loganair - a bit childish to filter someone unless someone is using bad language and of course his comment is infantile . the chart does show LONG TERM support at about £4 but I doubt it will ever get near that level and things can change quickly in markets with a turnaround taking us by surprise . Yes, the charts for RIO and BLT are not pretty pictures at present .

[idioterna] 08/1/2016 15:58

Considering the latest update on the Samarco situation it would appear that 30% was knocked off the share price on a hunch that the dividend might be reduced. That seems more than a little harsh, but what do I know?

You can bet that a few funds are desperate to acquire down here.

[loganair] 08/1/2016 11:03

Rickmay - your only posts seem to be the same 'TARGET £2 to £3 it's coming folks,' with no opinion or any information posted, therefore sadly I'm filtering you.

[loganair] 08/1/2016 10:59

It has been reported that BHP Billiton and Rio Tinto, two of the world’s largest miners, could look to sell new shares on the market to raise fresh capital.

Indeed, BHP and Rio Tinto have both been crushed by the recent commodities crisis, together with fears conditions will only worsen over the coming months (or maybe even years). But unlike many of their smaller rivals, they’re well equipped to weather the storm, even though their earnings results will take a hit. They maintain much lower production costs and can thus remain profitable for longer.

Other miners around the globe, on the other hand, have already been forced to close their operations for good, unable to cover their costs of production. But there are plenty that are still operating yet could look to offload some of their assets to free up additional cash.

In regards to BHP and Rio Tinto raising capital to take advantage of such opportunities, the AFR quoted analysts from Bank of America as saying: “We think there is no time like the present. Strengthening balance sheets would give flexibility if/when tier-one assets come to market.” It believes BHP could look to raise US$15.4 billion, compared to US$5.7 billion for Rio.

Of course, investors have cooled on the mining sector in recent years as the mining boom has unwound, so it’s likely there would be a limited pool of capital that investors would be willing to cough up. As such, the Bank of America analysts also suggested such a move by BHP and Rio Tinto would be bad news for others in the sector.



If BHP raise capital in order to buy the assets of other mining companies at distressed prices and the small private investor is able to take part, then I for one will almost definitely do so as in my good opinion will be an extremely good medium to long term investment by BHP.

[rickmay] 08/1/2016 10:51

TARGET £2 to £3 it's coming folks.

[loganair] 08/1/2016 10:48

orinocor - Depends whether one is looking short or long term. In my good opinion, long term I'd plump for BLT as it is one of the lowest cost miners of the commodities it mines and therefore when the prices begin to pick up again there is a greater likelihood of BLT share price gaining more than RIO with also a higher dividend yield, going forward long term.

I am a new investor into BLT and invested knowing there is a good probability of BLT dividend being cut by up to 50%, any thing less will be just an added bonus.

Coal, one of the 4 main comedies BLT mines - India has announced the building of 30 coal fired power station to increase electricity generation 4 fold.

'India imports 18.9 million mt coal in December, up 11% on month.'

[orinocor] 08/1/2016 10:29

BLT or RIO.

What is the better buy?

[idioterna] 08/1/2016 09:56

…in other words; if the dividend isn't slashed and Samarco is just being used as an excuse then the share price is totally out of whack.

[loganair] 07/1/2016 20:03

Risks and rewards:

Also offering a high degree of volatility now is BHP Billiton. The mining major continues to see its valuation tumble as falling commodity prices hit its profitability and investor sentiment in the wider sector. However, the company isn’t shying away from the tough external environment it faces and is rumoured to be considering the purchase of assets within the resources space as it seeks to take advantage of discounted valuations.

Undoubtedly, this is a risky move since asset prices within the mining and oil industry could fall further. But with global energy needs likely to rise in future years, M&A activity happening now could be rewarded in the medium-to-long term. Certainly, it may mean that dividends are cut. But with BHP yielding 11.5% at the present time, the market appears to be pricing this in. So buying BHP now may prove to be a sound move in the long run.

[idioterna] 07/1/2016 16:11

Samarco was the owner of the dam, not the mine. So the Samarco dam disaster would be closer to the truth. Unless, of course, it's true that Vale was responsible for the massive overload and then Smarco is innocent. But, that would mean Billiton is even more innocent than Samarco. Fines? Seriously, this will be the end of Vale if it gets anywhere near an international courtroom. It will never leave Brazil.

Even at $34 Billiton is still in profit. Not many others though :) So let's see who breaks first. The dividend will never be halved, they would always give their shareholders due warning. It's a trustworthy company. Something along the lines of: "In order to cover the potential costs of trial litigation and continued weakness in commodity prices we will have to curtail our aspirations of a progressive dividend policy and adjust accordingly. The next dividend will be down 9 cents from last year. Due to currency movements. :) Since we have anticipated the present commodity price and based our model on a $32 break-even there will be a dividend reduction on any quarterly price that averages below $32. If we didn't do that our managerial capabilities would be in serious question."

If we lied about the dividend and our profit margins, then we probably lied about the Samarco disaster too.

[loganair] 07/1/2016 11:34

By Roland Head - In my view, BHP remains one of the top quality choices in the big cap mining sector. The firm has a good selection of low-cost iron ore and copper assets, plus some decent oil and gas fields.

BHP’s balance sheet is relatively strong with net debt of about $25bn and only $3.2bn of debt due during the current year. Analysts’ forecasts suggest that BHP will report a post-tax profit of $2.1bn for the year ending on June 30, roughly the same as last year.

If 2016 proves to be the low point of the commodity cycle, then BHP’s continuing profitability is encouraging. While the tragedy at BHP’s jointly-owned Samarco mine in Brazil has increased the likelihood of a dividend cut in my view, I’m not overly concerned by either risk.

The cash costs of the Samarco disaster are likely to be manageable and spread over several years. BHP’s current forecast yield of 10% means that even if the dividend is halved, the shares still offer a potential yield of 5% at current prices.

I believe BHP shares are a buy below 800p.

[loganair] 07/1/2016 11:32

Iron Ore To Stabilize At $34 Per Ton:

Goldman Sachs is expecting the price of iron ore to decline to $38 by 2016, a reduction of 13% from its previous forecast of $44 for the year. However the outlook for 2017 and 2018 is even grimmer with price projections of $35 per tonne anticipated. These prices are based upon the projected cuts of 250M tons of iron ore - 18% of industry supply - within the next three years. The short term is particularly bearish vis-a-vis the Chinese steel producing industry. It is now estimated that the production cost per ton of iron ore is $35. But more importantly, analysts are forecasting more closures of iron ore mines in the year ahead as negative cash flow shutters operations en masse. The price of iron ore has not yet bottomed out, and there is still significant downward pressure that can be exerted on this commodity. As a result of the slowdown in China, there may well be a period of hibernation necessary where other steel markets assume the leadership role in the run-up to the upcoming bull market. Regardless, analysts at Banc De Binary now agree that the price we can expect for iron ore in the short term is $34 p/ton.

[hooley] 05/1/2016 16:15

MMs still filling their bears, bidding-up despite the net selling position. Keep well clear for the present. The fundamentals and news are lousy. The consensus among analyst remains bullish despite the share price halving in the past 3 months.

[rickmay] 05/1/2016 13:25

STILL ON TRACK £2 TO £3.

[rubberbullets] 05/1/2016 08:38

VED also sharply movuing higher, massive bowl to 600p on VED

[idioterna] 04/1/2016 14:38

…so how many do you plan to acquire at £3?

[rickmay] 29/12/2015 12:50

TARGET STILL ON TRACK £2 to £3.