Are these 4 Resources Stocks great opportunities heading into 2018 – BHP, RIO, WSA & NCM?

BHP Billiton Ltd

BHP Details
 
Separate marketing for its share of the Gippsland Basin Joint Venture: BHP Billiton Limited (ASX: BHP), after a voluntary agreement with the Australian Competition and Consumer Commission (ACCC) will do a separate marketing for its share of the Gippsland Basin Joint Venture (GBJV). BHP will leverage its significant experience in marketing oil and gas products globally for this and the voluntary decision ends the uncertainty for BHP, GBJV and the market. Moreover, BHP expects to lower the unit costs by a further 10% over the medium-term. The Australian mining operations of the company are expected to deliver US$1.6 billion of additional productivity gains over the next two years. Further, Brownfield Expansion option (BFX) at Olympic Dam is expected to provide a capital efficient path to increased capacity through accelerated development into the Southern Mine Area. The Southern Mine Area is expected to see the copper grade increase to 3% by financial year 2023, which the company expects that it would coincide with a structural deficit in the copper market. Meanwhile, BHP stock has risen 5.52% in three months as on December 15, 2017 and is trading at a reasonable level. The commodity price has improved recently and expected to maintain its momentum in 2018. Therefore, we give a “Buy” recommendation on the stock at the current price of $28.25


BHP Daily Chart (Source: Thomson Reuters)
 

RIO Tinto Ltd

RIO Details 

Planned to expand its fleet of autonomous trucks: Rio Tinto Limited (ASX: RIO) has planned to expand its fleet of autonomous trucks operating in Australia’s Pilbara iron-ore region, which is a part of a cost-cutting program across its operations. Therefore, RIO has signed deals with Komatsu Ltd and Caterpillar Inc to retrofit 48 trucks with Autonomous Haulage System (AHS) technology. The deals are due by the end of 2019. After completion of the deal, more than 130 of Rio’s Pilbara fleet of almost 400 trucks would be autonomous. On average, last year, each of its autonomous haul trucks operated an additional 1000 hours and at 15% lower load and haul unit cost than conventional vehicles. Moreover, RIO is planning future additions to the autonomous fleet in the Pilbara, which will help deliver the share of $5 billion of additional free cash flow for the company by 2021. Additionally, in 2018, RIO is expecting 510-610 kt mined copper, 225-265 kt refined copper and 17-20 Mcts diamonds. Meanwhile, RIO stock has risen 5.63% in three months as on December 15, 2017. Given the iron ore price forecasts and growth projects’ scenario compared to peers, we put an “Expensive” recommendation on the stock at the current price of $71.43


RIO Daily Chart (Source: Thomson Reuters)
 

Western Areas Ltd

WSA Details

Outlook for FY18: Western Areas Ltd (ASX: WSA) in FY17 had returned to an after-tax profit position and generated positive free cashflow. The cash at bank for FY17 had increased by A$65m mainly due to lower operating costs, improved terms from the new offtake contracts and the staged sale of the company’s interest in Bluejay Mining Plc which realised cash to the value of $32m in the latter half of the financial year.
 

FY18 Guidance (Source: Company Reports)
 
Moreover, WSA has progressed with Construction works for the Mill Recovery Enhancement Project (MREP), which is on time and on budget, and the commissioning and production has been scheduled for late in the March 2018 quarter. MREP commissioned in the third quarter of FY18 will add around 350 nickel tonnes for FY18. Additionally, FY18 top end guidance for mine and concentrate production will be close to FY17 actuals. The lower end of FY18 guidance for unit costs is slightly lower than the fourth quarter FY17 actual (A$2.42/lb). WSA is looking forward to complete and report on the DFS for the Odysseus project, that remains on track for delivery in April 2018. Meanwhile, stock has risen 12.17% in three months as on December 15, 2017. We give a “Hold” recommendation on the stock at the current price of $3.03


WSA Daily Chart (Source: Thomson Reuters)
 

Newcrest Mining Ltd

NCM Details

Encounter Resources has secured a major new tenement position in the Tanami region: Newcrest Mining Ltd (ASX: NCM) and Encounter Resources will enter a 50:50 joint venture under the terms of the Newcrest-Encounter project generation alliance after getting requisite approval for further exploration by both parties to the alliance. Under the project generation alliance with NCM, the Encounter tenements in the Tanami and Phillipson Range are being assessed, and Encounter Resources has secured a major new tenement position in the Tanami region of Western Australia. Tanami Gold Province hosts Newmont Mining Corporation’s Callie Gold mine, which is one of the world’s lowest cost gold mines where recent near mine exploration success has added new high-grade gold resources of significant scale. However, the tenement acquisition covers an area, that is significantly underexplored. Encounter has acquired the new land position based on the sporadic and fragmented exploration in the past. Based on the higher level of trading, we give an “Expensive” recommendation on the stock at the current price of $21.75


NCM Daily Chart (Source: Thomson Reuters)

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