BHP BILLITON LTD. ADRs $63 (New York symbol BHP; Conservative Growth Portfolio, Resources sector; ADRs outstanding: 2.7 billion; Market cap: $170.1 billion; Price-to-sales ratio: 2.2; Dividend yield: 3.5%; TSINetwork Rating: Average; 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.
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.
BHP recently said it would spend $80 billion on new projects by 2015, including building a new potash mine in Saskatchewan and expanding mines in Australia (iron ore) and Chile (copper). However, BHP is now scaling back these plans because the weak European economy has hurt commodity prices.
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%.
