World’s largest mining company steps up oil and gas assets

American Depositary Receipts make foreign investing easier and safer for individual investors. The foreign company must provide detailed financial information to U.S. regulators and to the sponsor, or depositary, bank or broker. As well, since ADRs trade on U.S. stock exchanges in U.S. dollars, you don’t have to worry about currency exchange rates, foreign stock exchange rules, or language barriers. Today we highlight one of the world’s most prominent commodity stocks, an ADR with its home base in Australia, and one that made headlines in Canada when its attempted takeover of Potash Corp. of Saskatchewan (Toronto symbol POT) was blocked by Ottawa in 2010. BHP Billiton Ltd. ADRs (New York symbol BHP; www.bhpbilliton.com) is the world’s largest mining company, with operations in Australia, South Africa, Chile and the U.K. It produces iron ore, coal, oil, natural gas, aluminum, manganese, diamonds and titanium. In 2011, BHP expanded its oil and gas business with two major purchases: it paid $12.0 billion for Petrohawk Energy Corp., which produces oil and natural gas in Texas and Louisiana; and $4.75 billion for shale gas properties in Arkansas. These acquisitions increased BHP’s oil and gas production by 58% in three months ended March 31, 2012, to 56.5 million barrels of oil equivalent (including gas) from a year earlier. [ofie_ad] BHP also reported that its iron ore production rose 14% in the latest quarter, to 37.9 million tonnes (iron ore supplies a third of BHP’s revenue). However, its production is down 8% from the previous quarter, because heavy rain slowed operations at its open pit mines in Australia. Similarly, metallurgical coal production rose 10%, to 7.3 million tonnes. However, that’s down 14% from the previous quarter due to labour disruptions and the heavy rains in Australia. The company’s balance sheet remains strong. Its long-term debt of $18.7 billion is a low 11% of its market cap. It holds cash of $3.6 billion, or $1.35 per ADR. BHP should earn $6.12 per ADR in its 2012 fiscal year, which ends June 30, 2012. It trades at 10.3 times that estimate. The $2.20 dividend yields 3.5%. In the latest edition of Wall Street Stock Forecaster, we look at BHP Billiton’s plans to build a new potash mine in Saskatchewan and expand mining operations in Australia and Chile and how those plans may be affected by the impact of a weaker European economy on commodity prices. We conclude with our clear buy-hold-sell advice on the stock. COMMENTS PLEASE Did you agree with the Canadian government’s decision in 2010 to block the sale of Potash Corp. to BHP Billiton? Did you believe it was an economically sound decision, or were the Conservatives simply playing politics? Is “Canada’s national interest” more important than your right to make money from your investments? Let us know what you think in the comments section below. Click here.