FCX

BHP Billiton, Rio Tinto Expanding Cash Flow, Paying Down Debt

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On Tuesday, mining giant BHP Billiton (BHP) reported solid financial results for the December 2013 half year, with underlying EBIT advancing by 15%, to $12.4 billion, and underlying attributable profit jumping by 31%, to $7.8 billion. The company noted that substantial improvements in productivity and volume from lower-risk projects drove a material improvement in its underlying EBIT margin and underlying return on capital for the period. BHP Billiton’s net operating cash flow increased 65% and investing cash outflows dropped 25%, resulting in a $7.8 billion increase in free cash flow from the comparable six-month period last year. We like that both measures are moving in the correct direction to drive free cash flow expansion. The firm is wisely using its … Read more

Miners Continue to Be Cautious

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Though profit margins on iron ore operations are hefty, swings in commodity prices translate into large swings in equity prices as mid-cycle valuations are tweaked. Management teams within the mining space are well-aware of the boom-and-bust cycles of their business, and recent tactical moves indicate that constituents continue to be very cautious. We commented on Rio Tinto’s (RIO) and Vale’s (VALE) decision to cut spending, and recent news suggests that BHP (BHP) will also look to keep annual spending below $15 billion, a large cut from the $21.7 billion the firm spent in the previous fiscal year. The billions of dollars in reduced mining equipment spending doesn’t bode well for firms specializing in earth-moving equipment such as Caterpillar (CAT) and … Read more

Mining Capital Spending Still Expected to Fall

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On Monday, Brazilian miner Vale (VALE) rolled out its capital spending budget for 2014. The board approved a $14.8 billion capital spending plan, with the lion’s share allocated to project execution. The expected level will be the lowest since 2010, near the depths of spending levels in the Great Recession:  After peaking in 2011 at $18.0 billion, capital and R&D expenditures in 2014 will show a decline for the third year in a row. This reflects the greater focus on capital efficiency, which entails among other things pursuing shareholder value maximization through a smaller portfolio comprised of projects with a high risk-adjusted expected rate of return. This is evidenced by the fact that more than 80% of the 2014 budget … Read more

Rio Tinto Says Iron Ore Production Breaks Record; Iron Ore Prices Recover

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On Tuesday, mining giant Rio Tinto (click ticker for report: ) issued impressive third-quarter production results that revealed record production and shipments of Western Australia iron ore thanks to the opening of its Pilbara 290 port and rail expansion (ahead of schedule and significantly under budget). We think this good news has only been sweetened by the recent recovery in iron ore prices, following a near-term bottom in early June. It’s important to note, however, that iron ore prices remain in a defined downtrend, and while we view the recent pricing performance as positive, we’re not celebrating just yet. Image Source: http://www.indexmundi.com/commodities/?commodity=iron-ore&months=60 Still, fundamentals are starting to brighten up just a bit for the mining group. Economic performance in China … Read more

Assets Need to Go: Vale Edition

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Though it has already sold nearly $3 billion in assets since 2012, Brazilian mining giant Vale (click ticker for report: ) is mulling additional asset sales. CEO Murilo Ferreira admitted Tuesday that the firm was considering selling its 40% stake in aluminum producer Norsk Hydro ASA as well as some of its oil and gas assets. Vale joins rivals Rio Tinto (click ticker for report: ), Anglo American, and BHP (click ticker for report: ) in the effort to focus on the best operations while selling off underperforming assets. As we’ve previously noted, this situation becomes difficult when every party is also interested in selling weak assets, as would-be buyers can seek out bargains and demand hefty discounts. The fundamental reasoning … Read more

Rio Tinto Improves Cash Flow in Weak Mining Environment

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Key Takeaways ·         Cost cuts helped Rio Tinto stomach weak commodity end markets. ·         Production increases buffered weak iron ore prices. ·         China remains a key driver of growth. Country data flow continues to contradict. ·         We continue to hold Rio Tinto in our Best Ideas Newsletter portfolio…but we think it could be a wild ride. Best Ideas Newsletter portfolio holding Rio Tinto (click ticker for report: ) announced weak, but better-than-expected, financial performance for the first half of 2013 Thursday. Earnings per share declined 71% year-over-year to $0.93, though revenue declined only 3% year-over-year to $24.5 billion as production increases were able to partially offset commodity price weakness. Underlying earnings per share, which is adjusted for one-time charges, exchange rates, and write-downs, … Read more

Freeport McMoRan Following the BHP Model

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Early Wednesday morning, leading copper and gold miner Freeport McMoRan (click ticker for report: ) announced a $9 billion blockbuster deal to acquire its former holding McMoRan Oil & Gas (click ticker for report: ) and independent oil and gas company Plains Exploration & Production (PXP). The deal itself values Plains at approximately $45-50 per share ($25 per share cash/0.6531 shares of FCX per share), while Freeport will pay $14.75 per share for McMoRan Oil & Gas. Given the cloudy long-term outlook for copper and gold mining, mainly a result of the often unfriendly places these resources reside, we think the company is happy to purchase operations in the Gulf and continental US. We’ve seen mine nationalization in both South … Read more

Dividend Increases/Decreases for the Week Ending March 27

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Below we provide a list of firms that raised their dividends during the week ending March 27. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports use the ‘Symbol’ search box in our website header. Firms Raising Their Dividends This Week AT&T Inc. 4.750% PFD SER C (T.PC): now $0.2408 per share quarterly dividend. AT&T Inc. 5 DEP RP PFD A (T.PA): now $0.3125 per share quarterly dividend, was $0.1701. Bancolombia (CIB): now $0.751 per share quarterly dividend, was $0.3000. Centerra Gold Inc. (CAGDF): declared CAD 0.04 per share interim dividend, was $0.0285. Future Fuel (FF): declared $3.00 per share special dividend, was $0.06. Healthcare Trust, Inc. … Read more

ICYMI — Video: Will Hasty Policy Facilitate the Next Leg Down, or Do We Have It Coming Anyway?

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President of Investment Research and award-winning author of Value Trap: Theory of Universal Valuation Brian Nelson explains how US policymakers are stuck between a rock and a hard place, and how the market may be factoring in too high of a probability of a return to normalcy before 2021. This and more in the latest video report. Summary Make sure you review Value Trap on Amazon. Do so here. We think those that bought equities near the bottom of this swoon may be looking to take profits at present levels. The market is currently reflecting an 80%-85% probability of a return to normalcy before 2021, which we believe is too high at this time. Our main concern is that government … Read more

Steel Dynamics Bets Big on North America’s Industrial Economy

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Image Source: Steel Dynamics Inc – June 2020 IR Presentation By Callum Turcan Investor sentiment towards the steel industry is rebounding as the medium- and long-term outlook for global industrial activity has improved markedly since March 2020. The ongoing coronavirus (‘COVID-19’) pandemic has significantly hampered near-term industrial activity, though major fiscal stimulus packages (made feasible through major monetary stimulus programs) launched in various developed nations could provide some relief. Shares of Steel Dynamics Inc (STLD) have recovered meaningfully since their March 2020 lows and are trading a tad below our fair value estimate as of this writing. Shares of STLD yield ~3.6% on an annualized forward-looking basis as of this writing and we give the steel maker a Dividend Cushion … Read more