Still ticking the boxes
MINING COMPANIES’ profits are driven by three factors: cost controls, production output and the price they receive for the commodity they mine. BHP Billiton* results showed excellent performance for the first two parts of the equation; cost control and production, but soft commodity prices hurt profits.
In other words, management managed what it could and that is what you want in a quality mining company. So with BHP Billiton we have a top diversified mining company that only needs commodity prices to
MASSMART HOLDINGS come to the party.
Earnings are underpinned by great exposure to iron ore and energy, but the former is of some concern, with China being the real issue. New production coming online also adds risk to prices. Will China hold up for a soft landing or will it be hard? This really is the question that the investment case for BHP Billiton hinges on. If, like me, you think it’ll be a soft landing then BHP Billiton is a ‘Buy’.
*The writer owns shares in BHP Billiton.