BHP Billiton Limited
Tracking well on company-wide efforts:With iron ore futures dropping a bit, BHP Billiton Limited’s (ASX: BHP) stock edged lower by 0.75% on January 16, 2018. The group lately announced about funding a total of up to US$181 million (BHP Billiton Brasil Ltd (BHP Brasil) share) for the Renova Foundation and Samarco Mineração S.A. (Samarco) until 30th June 2018. In this, an amount of US$133 million will be used to fund the Renova Foundation to undertake remediation and compensation programs identified under the agreement dated 02 March 2016 among Samarco, Vale S.A., BHP Brasil and the Brazilian Authorities. The remaining amount of US$48 million will be made available to Samarco. On the other hand, BHP stock has risen 18.37% in three months as on January 15, 2018. We believe that some amount of upside potential still exists for the stock given the annualised productivity gains of about US$12 billion, capex target to be below US$8 billion for FY19 and FY20, and tracking on growth projects including Mad Dog Phase 2 and the Spence growth project. Based on the foregoing and the stock touching high levels, we give a “Hold” recommendation on the stock at the current price of $31.66
Rio Tinto Limited
Released fourth quarter production results: Rio Tinto Limited (ASX: RIO) also witnessed a slight drop of about 0.66% in share price on January 16, 2018 while RIO reported its fourth quarter result and posted 3% increase in the Pilbara iron ore shipments to 90.0 million tonnes compared to the fourth quarter of 2016. The total shipments for 2017 were 330.1 million tonnes, which were in line with the company’s guidance. The full year bauxite production grew 6% to 50.8 million tonnes, which is in line with upwardly revised full year guidance. The third party shipments grew by 10% to 32.3 million tonnes. RIO has posted aluminium production of 3.6 million tonnes, which is in line with guidance however slightly offset by lower production at Boyne and Sohar. The year on year mined copper production fell 9% to 478.1 thousand tonnes primarily due to the impact of a 43 day strike at Escondida in the first quarter, which is also in line with the revised guidance. Moreover, for 2018, RIO expects mined copper production to be between 510 and 610 thousand tonnes and refined copper production is expected to be between 225 to 265 thousand tonnes. The Diamond production projection for 2018 is between 17 and 20 million carats. In 2018, Pilbara shipments are expected to be between 330 and 340 million tonnes (100 per cent basis). Additionally, RIO has completed an A$750 million off-market buy-back in RIO shares and in December has completed a $1.5 billion on-market buy-back of Rio Tinto plc shares. Further, an additional $1.925 billion on-market buy-back in Rio Tinto plc shares has commenced on 27 December 2017 and will be completed no later than 31 December 2018. In addition, RIO had received a binding offer for the sale of the Aluminium Dunkerque smelter in France for $500 million, subject to final adjustments. The sale is expected to complete in the second quarter of 2018 after the satisfactory completion of consultations with key stakeholders. Meanwhile, RIO stock has risen 15.95% in three months as on January 15, 2018. With the recent volatile scenario on commodities and trading level of the stock in view of the growth projects that include Silvergrass iron ore mine, we give an “Expensive” recommendation on the stock at the current price of $81.26
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Fourth Quarter 2017 Production (Source: Company Reports)
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