Should you buy BHP?

BHP Billiton Limited

BHP Details

Fall in iron ore prices dragging the miners down: Shares of mining giant, BHP Billiton Ltd (ASX: BHP) declined 3.7% on 21 June 2017, led by drop in Chinese steel futures on Tuesday after a four-day rise weighed on iron ore which dragged metals and mining stocks to their lowest in more than a month and a half.

The BHP Board has elected Ken MacKenzie to succeed Jac Nasser as Chairman. Mr. MacKenzie will assume the role of Chairman effective 1 September 2017, following Mr. Nasser’s retirement as both Chairman and a Non-Executive Director. The appointment follows a formal Chairman succession process led by Senior Independent Director, Shriti Vadera. Mr. MacKenzie joined the BHP Board as a Non-Executive Director in September 2016 and is a member of the Board’s Sustainability Committee. He has extensive international business experience gained during his 23 years at Amcor, a global packaging company with operations in over 40 countries. Further, Mr. MacKenzie served as Managing Director and Chief Executive Officer for 10 of those 23 years.

Major project developments are progressing well: For 9MFY17, BHP reported a record production at Western Australia Iron Ore (WAIO) and five Queensland Coal mines supported by increased wash plant utilization, while truck utilization also improved at New South Wales Energy Coal. However, copper production guidance was reduced to between 1.33 and 1.36 Mt following 44 days of industrial action at Escondida, while metallurgical coal production guidance reduced to 39-41Mt due to damage of third party rail infrastructure caused by Cyclone Debbie. While full year production guidance was maintained for petroleum and energy coal, WAIO production guidance was narrowed to 268-272 Mt. At Queensland Coal, the high-return Caval Ridge Southern Circuit latent capacity project was approved and is expected to have full utilization of the 10 Mtpa wash-plant with ramp-up early in the 2019 financial year. The stock declined by 6.7% in the last one month owing to fluctuations in commodity prices, while it was up 21.7% in the last one year. Given the ongoing projects progress and cost controls, we maintain a “Buy” recommendation on the stock at the current market price of $ 22.10


BHP Daily chart; (Source: Thomson Reuters)

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