Showing posts with label bhp billiton. Show all posts
Showing posts with label bhp billiton. Show all posts

Thursday 5 July 2012

A UK Blue-Chip Starter Portfolio


Company
Industry
Share Price (Pence)
P/E
Yield (%)
HSBCFinancials5619.05.2
Royal Dutch ShellOil & Gas2,2257.65.0
BHP Billiton (LSE: BLT.L  )Basic Materials1,8067.64.3
British American TobaccoConsumer Goods3,24214.64.5
Tesco (LSE: TSCO.L  )Consumer Services3108.85.0
GlaxoSmithKlineHealth Care1,44711.45.3
Vodafone (LSE: VOD.L  )Telecommunications17910.97.4
Rolls-RoyceIndustrials85814.22.4
National GridUtilities67612.46.1
ARM HoldingsTechnology50632.20.9

Excluding tech share ARM, the companies have an average P/E of 10.7 and an average yield of 5.0%. The numbers were 9.8 and 5.2%, respectively, when I last carried out this exercise in October 2011.
So, the group is rated a bit more highly today than it was nine months ago. However, I think it still veers towards the value end of the spectrum, because my rule of thumb for this group of nine is that an average P/E below 10 is firmly in "good value" territory, while a P/E above 14 starts to move toward expensive.


Wednesday 6 October 2010

Rio kills off BHP deal

Michael West
October 6, 2010

THE biggest merger in Australian history is dead, with the board of Rio Tinto preparing to walk away from a $120 billion iron ore deal to join forces with rival mining company BHP Billiton in the Pilbara desert in Western Australia.
The aborted merger deal - which follows an unsuccessful $180 billion takeover bid for Rio by BHP two years ago - was expected to meet opposition from European and Chinese regulators concerned about the impact of the miners' stranglehold on global iron ore prices.
But the major reasons for Rio's decision appear to be its improving financial fortunes, pressure from shareholders and the conclusion that the deal favoured BHP.
Sources close to the Rio board confirmed Rio was preparing to tell BHP of its decision yesterday. Rio chairman Jan du Plessis had informed fellow directors on Monday night that he did not think BHP would object to Rio calling an end to the deal.
''They can't object to that,'' Mr du Plessis said. ''That's kind of us stating our investment preference. They will no doubt have their own measurements and I think that's fine.''
Although the market had speculated about the failure of the Pilbara deal since BusinessDay first foreshadowed its collapse in August, there had been no acknowledgement from either party that the merger was in trouble.
Now Rio, having canvassed the opinion of its major investors, is looking to save face.
''I think with regard to the JV and why it didn't succeed … we should simply work on the basis that both parties worked well and in good faith to make this thing work and both parties agreed, simultaneously, it wasn't possible.
''In short, I think we have a positive message we should spread … I would caution against trying to be too critical as far as BHP is concerned, or kind of denigrating them in any way. I'm not sure that gets us anywhere,'' Mr du Plessis told his fellow directors.
BusinessDay understands other directors agreed with the positive public strategy. One, Sir Rod Eddington, responded to Mr du Plessis, saying, ''In fact the opposite Jan. I think it blows up in our face''.
Besides needing the approval of regulators, the deal required approval from both BHP and Rio shareholders. And it was this which finally prompted the Rio board to move. Rio - whose iron ore production is roughly twice the size of BHP - stood to gain a $5.8 billion ''equalisation payment'' from BHP. This was no longer viewed as adequate.
When the deal was cut in 2009, Rio was heavily in debt and had fallen afoul of its Chinese customers thanks to its infamous fall-out with Chinalco.
Since then, Rio has cut its debt by almost 40 per cent, its share price is strong and it has struck a $12 billion iron ore deal in West Africa with Chinalco.

Thursday 20 May 2010

Mining tax 'contagion' set to spread globally

Mining tax 'contagion' set to spread globally
May 20, 2010 - 10:39AM

Australia’s planned 40 per cent tax on mining "super profits" has set a benchmark for other countries weighing higher levies, reducing earnings forecasts for BHP Billiton and Rio Tinto and the attraction of mining stocks.

“It could create what the miners are now describing at a global level as a type of tax contagion,” said Tom Price, commodities analyst with UBS in Sydney. “They might levy a new tax at the miners in Brazil. Canada is another mineral province and South Africa.”

BHP, the world’s largest mining company, Xstrata and Rio said they are reviewing projects in Australia, the No. 1 exporter of coal and iron ore, after the federal government unveiled the tax earlier this month, saying a country’s resources belong to the people. Citigroup analyst Craig Sainsbury said Canada, Peru and Chile may be next.

“Resource nationalism” is a major risk facing miners in the next few years, Evy Hambro, manager of BlackRock Investment Management’s flagship World Mining Fund said last month.

Chile, the biggest copper exporter, is proposing a temporary rise in mining taxes to help pay for earthquake reconstruction that may cost BHP, Xstrata and Anglo American $US1.2 billion ($1.4 billion) in the next two years. Brazil, the second-biggest iron ore exporter, may tax shipments of the commodity or raise royalties, Energy and Mining Minister Edison Lobao has said.

‘Markets suicide’

The Australian tax plan is “global financial markets suicide,” according to Charlie Aitken, the executive director of Southern Cross Equities, the equal top ranked predictor of BHP’s share price performance of 17 analysts, according to data compiled by Bloomberg.

Mining companies’ earnings may be cut by almost a third when the tax starts in 2012, Moody’s Investor Services said this week. The tax would be broadly credit negative for the sector and raise uncertainty for some companies over the short-to-medium term, Moody’s said.

The tax may also prompt European and Scandinavian nations to seek a greater share of revenue from production, Magnus Ericsson, a senior partner at Raw Materials Group, a mining data and analysis company, said. The proposal will make Australian mines the highest taxed in the world, according to Minerals Council of Australia.

“Economies, particularly European economies, are going to have to deal with deficits,” said Jamie Nicol, chief investment officer at Dalton Nicol Reid in Brisbane. “They are going to look at some sort of innovative tax solutions to try and claw back some of that.”

Levy wars

Nations that resist may attract investment. South Africa taxes mining companies at 33 per cent, Canada 23 per cent and China 30 per cent compared with a forecast 58 per cent in Australia after the tax, according to Citigroup data.

Treasurer Wayne Swan has said he “strongly disagrees” with claims the tax will damage miners. China’s demand for Australian metals will outweigh higher taxes, according to AMP Capital Investors, a unit of the country’s largest pension plan provider, which hasn’t changed its industry assessment.

Rio, the world’s third-largest mining company, this month said it will spend $US401 million to boost iron ore output in Canada, citing the “attractiveness of investing” in the North American nation. BHP has said the tax would stymie investment.

Fortescue, Australia’s third-largest iron ore exporter, this week placed $US15 billion of projects on hold, citing the tax.

“It doesn’t matter if it’s the Congo or Sudan, or it’s Australia or Canada, these projects require commitments by governments that are 30 years and when they move the goal posts they will have a serious rippling effect,” said Frank Holmes, chief investment officer of US Global Investors. “They could stifle the world.”

Bloomberg

Monday 2 February 2009

Rio in talks with Chinalco over £10bn cash injection

Rio in talks with Chinalco over £10bn cash injection
$40bn debt forces miner to consider link-up with China's state-owned giant
By Nick ClarkMonday, 2 February 2009

Rio Tinto is preparing for further talks with China's state-owned mining giant Chinalco over a potential £10bn cash injection to ease its mountain of debts.
FTSE 100-listed Rio, which admitted for the first time last week that it could consider a rights issue, has held negotiations over a potential investment from the Chinese in recent weeks. The group hopes that a deal could be announced as early as its full-year results next week as the latest step in its programme to reduce debts of $40bn. The group has pledged to cut that by $10bn this year.
It is understood that the talks have gone beyond preliminary negotiations, but nothing has been finalised. Details are unclear, but beyond lifting its existing stake, Chinalco could be issued with a convertible bond by Rio. Chinalco could also be interested in taking on some of its mines or take minority positions in some of its more valuable assets.
Rio declined to comment yesterday.
Chinalco has enjoyed a close relationship with Rio since it bought an 11 per cent stake in the group in a dawn raid last February, and it was thought to be keen to up its stake. Rio's boss, Tom Albanese, is interested in teaming up with the Chinese over iron ore projects, and there was talk of the two companies developing infrastructure in Australia last year.
The group is trying to raise funds to cope with its debts. Rio is the most highly leveraged of the mining giants on the London Stock Exchange's blue-chip index. The brunt of the debt was brought on with the $38bn acquisition of the US aluminium group Alcan at the top of the market in 2007. It has to refinance $9bn of debt in October.
Rio launched its planned asset fire sale last week as it offloaded two mines to Brazilian rival Vale in a deal worth $1.6bn. It announced on Friday that it had agreed to sell its Potasio Rio Colorado project in Argentina, and the Corumba iron mine in Brazil. Yet the group has struggled to raise enough interest for its assets as credit remains scarce and potential sellers have failed to come up with adequate offers. Insiders have said it is even willing to listen to bids for its 30 per cent stake in Escondida, the world's largest copper mine.
As well as the sale of "non-core" assets, the company is looking to bolster its savings with a dramatic cost-cutting plan and curb on spending. It intends to cut 14,000 jobs and reduce capital expenditure by $5bn next year.
On Wednesday, for the first time, the group announced it could raise money from shareholders. "In order to preserve maximum flexibility for the group, the boards do not rule out the potential to issue equity as one of the options it has available," it said.
The sector has been hit by the falling demand for commodities, especially from China. Rio's share price had been buoyed in the wake of a hostile takeover attempt by BHP Billiton in 2007, which would have been one of the biggest deals in corporate history. The $58bn merger collapsed in November when BHP walked away, blaming the worsening economic conditions and the fall in commodity prices. The shares plunged and are 76 per cent off their peak in May.
Rival Xstrata announced it would turn to shareholders to raise $5.9bn in a heavily discounted rights issue, to pay down its debts and buy a coal mine. Xstrata has $16.3bn of debt, but it does not need refinancing until 2011.

http://www.independent.co.uk/news/business/news/rio-in-talks-with-chinalco-over-16310bn-cash-injection-1523111.html