commodity
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.
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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.
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Uranium Participation Corp., $5.25, symbol U on Toronto (Shares outstanding: 106.4 million; Market cap: $558.6 million; www.uraniumparticipation.com), is a holding company that was created to invest almost all of its assets in uranium oxide (U3O8). Denison Mines (symbol DML on Toronto) manages Uranium Participation Corp. The company began trading in May 2005 after it issued 20 million units at $5 each to raise $100 million. Each unit consisted of one common share of Uranium Participation Corp. and one-quarter of one warrant. Each whole warrant entitled the holder to acquire one common share at $6.25 per share until May 2007. Uranium prices reached an all-time high of $136 U.S. a pound in 2007 on fears of shortages. As a result, Uranium Participation Corp. shares hit an all-time high of almost $19. However, the shortages never materialized. Uranium prices then steadily declined to a low of $40 U.S. a pound in 2009, then rebounded to $64 U.S. in February 2011. That rebound moved Uranium Participation Corp. units from roughly $6 a unit up to $9.50....
SHERRITT INTERNATIONAL $5.26 (Toronto symbol S; TSINetwork Rating: Speculative) (1-800-704- 6698; www.sherritt.com; Shares outstanding: 296.7 million; Market cap: $1.6 billion; Dividend yield: 2.9%) is a diversified natural resource company that produces nickel, cobalt, thermal coal, oil and gas. It also manages 376 megawatts of power generation capacity in Cuba. Sherritt is a major nickel producer, with operations in Cuba and Canada. It is also close to finishing a mine at its 40%-owned Ambatovy project on the island nation of Madagascar, off Africa’s east coast. As well, Sherritt produces oil and gas in Cuba, Spain and Pakistan. It is also Canada’s largest thermal coal producer. In the three months ended March 31, 2012, Sherritt’s revenue fell 2.6%, to $462.2 million from $474.5 million a year earlier. Lower nickel prices were the main reason for the decline. Cash flow fell 17.0%, to $117 million, or $0.40 a share, from $141 million, or $0.48 a share. That was due to the lower revenue and higher production costs....
SHERRITT INTERNATIONAL $5.26 (Toronto symbol S; TSINetwork Rating: Speculative) (1-800-704- 6698; www.sherritt.com; Shares outstanding: 296.7 million; Market cap: $1.6 billion; Dividend yield: 2.9%) is a diversified natural resource company that produces nickel, cobalt, thermal coal, oil and gas. It also manages 376 megawatts of power generation capacity in Cuba.
Sherritt is a major nickel producer, with operations in Cuba and Canada. It is also close to finishing a mine at its 40%-owned Ambatovy project on the island nation of Madagascar, off Africa’s east coast. As well, Sherritt produces oil and gas in Cuba, Spain and Pakistan. It is also Canada’s largest thermal coal producer.
In the three months ended March 31, 2012, Sherritt’s revenue fell 2.6%, to $462.2 million from $474.5 million a year earlier. Lower nickel prices were the main reason for the decline. Cash flow fell 17.0%, to $117 million, or $0.40 a share, from $141 million, or $0.48 a share. That was due to the lower revenue and higher production costs.
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Sherritt is a major nickel producer, with operations in Cuba and Canada. It is also close to finishing a mine at its 40%-owned Ambatovy project on the island nation of Madagascar, off Africa’s east coast. As well, Sherritt produces oil and gas in Cuba, Spain and Pakistan. It is also Canada’s largest thermal coal producer.
In the three months ended March 31, 2012, Sherritt’s revenue fell 2.6%, to $462.2 million from $474.5 million a year earlier. Lower nickel prices were the main reason for the decline. Cash flow fell 17.0%, to $117 million, or $0.40 a share, from $141 million, or $0.48 a share. That was due to the lower revenue and higher production costs.
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TECK RESOURCES LTD. $35 (Toronto symbol TCK.B; Conservative Growth Portfolio, Resources sector; Shares outstanding: 586.0 million; Market cap: $20.5 billion; Price-to-sales ratio: 1.8; Dividend yield: 2.3%; TSINetwork Rating: Average; www.teck.com) is a leading producer of metallurgical coal, a key ingredient in steelmaking. Coal accounted for 49% of Teck’s 2011 revenue and 57% of its earnings. The company also produces copper (27%, 28%) and zinc (24%, 15%).
Teck continues to benefit as the recovering global economy pushes up commodity prices. As well, in 2008, the company bought the 80.05% of Fording Canadian Coal that it didn’t already own. This purchase has further spurred Teck’s growth.
Teck continues to benefit as the recovering global economy pushes up commodity prices. As well, in 2008, the company bought the 80.05% of Fording Canadian Coal that it didn’t already own. This purchase has further spurred Teck’s growth.
Quick rebound from downturn
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ROYAL BANK OF CANADA $56 (Toronto symbol RY; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.4 billion; Market cap: $78.4 billion; Price-to-sales ratio: 2.2; Dividend yield: 4.1%; TSINetwork Rating: Above Average; www.rbc.com) is Canada’s largest bank, with $815.0 billion of assets.
The U.S. Commodity Futures Trading Commission (CFTC) recently accused Royal of using a complex series of trades to cut its tax bill in Canada. Specifically, the CFTC says that divisions of the bank bought Canadian and U.S. dividend-paying stocks (plus futures contracts on these stocks) and quickly sold them to other divisions. These transactions would let Royal earn tax credits on the dividends it received from these holdings.
The CFTC claims that this process was a wash trade, in which the bank artificially set prices for these transactions, instead of letting the market determine the prices. Royal has denied these allegations, and we agree with Royal. As well, any potential fine would likely be small next to Royal’s earnings.
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The U.S. Commodity Futures Trading Commission (CFTC) recently accused Royal of using a complex series of trades to cut its tax bill in Canada. Specifically, the CFTC says that divisions of the bank bought Canadian and U.S. dividend-paying stocks (plus futures contracts on these stocks) and quickly sold them to other divisions. These transactions would let Royal earn tax credits on the dividends it received from these holdings.
The CFTC claims that this process was a wash trade, in which the bank artificially set prices for these transactions, instead of letting the market determine the prices. Royal has denied these allegations, and we agree with Royal. As well, any potential fine would likely be small next to Royal’s earnings.
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VITERRA $15.95 (Toronto symbol VT; TSINetwork Rating: Average) (1-866-569-4411; www.viterra.ca; Shares outstanding: 371.7 million; Market cap: $5.9 billion; Dividend yield: 1.0%) has agreed to a friendly takeover offer from Glencore International plc, a Switzerland-based commodity trader. The purchase price is $6.1 billion, or $16.25 per Viterra share. Viterra was our Pick of the Month in the March 2012 issue of Stock Pickers Digest. At the time, it was trading at $10.09. That’s a 58.1% gain since that recommendation. Our view was that the company is well positioned to benefit from an expected rise in Canadian and Australian crop yields in 2012, as well as the end of the Canadian Wheat Board’s monopoly on western Canadian wheat and barley sales. In addition, its Australian operations’ sales to Asia continue to rise. We also said that Viterra might be an attractive takeover target....
Uranium Participation Corporation, $5.56, symbol U on Toronto (Shares outstanding: 106.4 million; Market cap: $591.6 million; www.uraniumparticipation.com), is a holding company that was created to invest almost all of its assets in uranium oxide (U3O8). Denison Mines (symbol DML on Toronto) manages Uranium Participation Corporation. The company began trading in May 2005 after it issued 20 million units at $5 each to raise $100 million. Each unit consisted of one common share of Uranium Participation Corporation and one-quarter of one warrant. Each whole warrant entitled the holder to acquire one common share at $6.25 per share until May 2007. Uranium prices reached an all-time high of $136 U.S. a pound in 2007 on fears of shortages. As a result, shares of Uranium Participation Corporation hit an all-time high of almost $19. However, the shortages never materialized. Uranium prices steadily declined to a low of $40 a pound in 2009, then rebounded to $64 in February 2011. Uranium Participation Corporation’s shares hit a low near $5 in the fall of 2008. Since then, they have mainly stayed between $6 and $9.50....
ROYAL BANK OF CANADA (Toronto symbol RY; www.rbc.com) is Canada’s largest bank, with $815.0 billion of assets. The U.S. Commodity Futures Trading Commission (CFTC) recently accused Royal of using a complex series of trades to cut its tax bill in Canada....
Bank of Nova Scotia is our top pick among Canada’s five main banks, but the other four also have bright prospects. Most are using their strong balance sheets to make profitable acquisitions at bargain prices. That should let them keep raising their dividends. ROYAL BANK OF CANADA $56 (Toronto symbol RY; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.4 billion; Market cap: $78.4 billion; Price-to-sales ratio: 2.2; Dividend yield: 4.1%; TSINetwork Rating: Above Average; www.rbc.com) is Canada’s largest bank, with $815.0 billion of assets. The U.S. Commodity Futures Trading Commission (CFTC) recently accused Royal of using a complex series of trades to cut its tax bill in Canada. Specifically, the CFTC says that divisions of the bank bought Canadian and U.S. dividend-paying stocks (plus futures contracts on these stocks) and quickly sold them to other divisions. These transactions would let Royal earn tax credits on the dividends it received from these holdings....