Q4 BHP Opportunites Create Long-Term Investment Potential

Despite declining commodity prices in 2012, BHP Billiton (BHP) management remains confident in its ability to capitalize on opportunities in the near term. BHP will reinvest $22 billion during its current fiscal year to expand upon its current operations — the Escondida copper mine in Chile, the Gulf of Mexico oil fields, and the metallurgical coal division in Australia will resume full capacity production. Reinvesting in projects to bolster short-term and long-term prospects is management’s core focus during this period.

BHP Billiton is not the only diversified mining firm that’s feeling pressure from economic uncertainties in the US, China, and Europe. Both Rio Tinto (RIO) and Vale (VALE) are cautiously reviewing their respective near-term operations in order to compensate for the continuously declining demands for raw materials and metals since the 2009 recession. Current shareholders should hold BHP long term, while interested investors should consider 2012 as an opportune entry point to optimize capital appreciation and ROI.

Rio Tinto, Vale, Freeport-McMoRan Copper & Gold (FCX), and Barrick Gold (ABX) are the diversified mining firms that are most comparable to BHP Billiton. Both, BHP Billiton and Freeport-McMoRan trade for around 12.3 times earnings, while Rio Tinto’s price is the highest at 22.9 times earnings. Barrick’s price is around 9.5 times earnings, and Vale’s price is around 5.9 times earnings. BHP Billiton’s price is 2.6 times sales and 1.7 times its book value. Its current ratio is around 0.93, and its debt-to-equity ratio is around 0.43. Barrick Gold’s 0.56 debt-to-equity ratio is the only one higher than BHP Billiton’s. To continue reading, click here.

Tagged bhp-q4-2012