Still tick­ing the boxes

Finweek English Edition - - INVESTMENT - SI­MON BROWN

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.

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