Company is the worlds largest diversified resources group. It has seven divisions: Petroleum, Aluminium, Base Metals, Carbon Steel materials, Diamonds and speciality products, Energy coal and Stainless steel materials.

            Red = 25 day moving average.           Green = 200 day moving average.

SALES PER ACTIVITY (Data as of 30/06/2006)

Carbon steel:   28%
Oil:                18%
Aluminum:       15%
Basic metals:   15%
Coal:               9%
Stainless steel: 9%
:                    3%
Diamonds,
minerals, etc:   3%

CitiBank summary:
"BHP Downgrade to Neutral — Diversity has previously saved BHP, but we are bearish on the 3 biggest earnings drivers in iron ore, coking coal and oil. With net debt rising in FY15 & 16, and rising further after South32 demerger, we expect further cuts to capex will likely be required. We downgrade BHP to Neutral, previously Buy."

StockMarketWire.com
Equity research analysts at Goldman Sachs have moved to a 'neutral' rating (from 'conviction buy') on mining group BHP Billiton (LON:BLT), stating that it sees limited catalysts for the stock in the near future.

The City heavyweight added: "Our reasons for downgrade are threefold: 1) our commodities team downgrade of iron ore implies BHP's average earnings (EBITDA) for 2015-17E fall by 7%. 2) On our commodity price deck we believe BHP will not be able to cover its dividend from FCF (FY16/17E dividend yield is forecast to be 6.3%/6.7% while FCF yield is 2.9%/4.9%). And 3) South32 catalyst played out."

Goldman also cut its price target to 1,400 pence a share (from 1,600 pence), implying 4 per cent downside based on yesterday's closing price.

StockMarketWire.com
BHP Billiton's group production increased by 9% for the 2015 financial year. Over the past two years, production from its core portfolio grew by 27%.

Petroleum production increased by 4% to a record 256 MMboe, supported by a 67% increase in Onshore US liquids volumes to 56 MMboe.

Copper production was unchanged at 1.7 Mt as strong operating performance at Escondida offset the impact of a mill outage at Olympic Dam.

Western Australia Iron Ore production increased by 13% to a record 254 Mt (100% basis), underpinned by productivity gains across the integrated supply chain.

Metallurgical coal production increased by 13% to a record 43 Mt.

Three major projects achieved first production during the 2015 financial year, including the Escondida Organic Growth Project 1 which was completed in the June 2015 quarter.

The demerger of South32 from BHP Billiton was successfully completed during the June quarter.

Underlying attributable profit in the June 2015 half year is expected to include additional charges in a range of approximately US$350 million to US$650 million.

Chief executive Andrew Mackenzie said: "Our businesses performed well over the 2015 financial year. We have improved the performance of our equipment, reduced costs, and increased volumes despite a significant reduction in capital spend. Our simpler portfolio following the demerger of South32 will help us maintain the pace of operational improvement, further supporting cash generation, margins and returns. "Better productivity will be the sole source of volume growth at Western Australia Iron Ore in the 2016 financial year with production forecast to increase by seven per cent and unit costs are expected to fall to US$16 per tonne. "In Petroleum, through improved recoveries and lower drilling costs, we expect to maintain production in the Black Hawk and Permian in the 2016 financial year despite cutting annual shale investment by over 50 per cent. Although our decision to cut spending in the Onshore US will mean deferring gas volumes in the near term, we expect to realise greater value by developing our acreage later.

"We remain confident that our focus on best-in-class performance together with our unrivalled asset quality, optimal diversification and continued investment in high-return projects, will create long-term value through the cycle and deliver superior returns to our shareholders."

BHP BILLITON RESULTS FOR THE YEAR ENDED 30 JUNE 2015

· The health and safety of our people is our first priority. After no fatalities in the 2014 financial year, we tragically lost five colleagues this year. It is our ongoing goal to have a workplace free from fatalities and serious injury and we have implemented a company-wide program to improve performance.
· Underlying EBITDA(1) of US$21.9 billion and an Underlying EBITDA margin(2) of 50% for the 2015 financial year demonstrate the quality of our portfolio and its resilience in challenging markets. Underlying EBIT(1) declined by 46% to US$11.9 billion.
· Our focus on best-in-class performance delivered productivity gains of US$4.1 billion(3), two years ahead of target. We expect further cost reductions in the 2016 financial year across all businesses.
· Capital and exploration expenditure(4) decreased by 24% to US$11.0 billion in the period and is expected to decline to US$8.5 billion in the 2016 financial year and US$7.0 billion in the 2017 financial year.
· Improved operating and capital productivity combined with the flexibility of our investment program supported free cash flow(2) of US$6.3 billion.
· We maintained our solid A credit rating(5) and finished the period with net debt(2) of US$24.4 billion, a decline of US$1.4 billion.
· Our commitment to the progressive dividend is unchanged. Our full-year dividend increased by 2% to 124 US cents per share.

Jefferies note:
"If commodity prices stabilize as we expect, highly leveraged miners should take advantage of the opportunity to strengthen their balance sheets via asset sales and equity issuances. Miners with financial flexibility are best positioned to buy high quality assets at a very weak point in the cycle. BHP and Rio - two of our top picks - have strong balance sheets but should change their dividend policies to capitalize on opportunities.
Recent share price recovery has been dramatic and has created opportunities: The Glencore share price collapse from last week dragged most of the sector down with it. Fears about a funding issue for Glencore have subsided, and mining equity valuations have re-rated as a result. The delay to a Fed rate hike has also helped the sector, and the demand outlook for China has arguably modestly improved due to property market strength and potential targeted fiscal stimulus. We expect mining share prices to be supported in the near-term as macro headwinds have eased. As we discuss in this note, miners with leveraged balance sheets should take advantage of the recovery as downside tail risks have not disappeared. We expect M&A activity to materially increase over the next year, and leveraged miners will continue to be under pressure to recapitalize their balance sheets via asset sales and equity issuances. It is increasingly likely that higher quality assets will be made available. Miners with strong balance sheets and financial flexibility have the opportunity to create long-term value via asset purchases at what is still a very weak point in the cycle.
BHP and Rio have progressive dividend policies which limit their financial flexibility: BHP Billiton and Rio Tinto have rock solid balance sheets, but almost all of their free cash flow is being used to pay dividends. Based on our analysis, they are therefore limiting their ability to create value via opportunistic investment during the current downturn. Their dividend yields (7.2% for BHP and 5.9% for Rio) are high enough to indicate that the market already expects a dividend cut at some point. However, they are unwilling to cut their dividends because they have progressive dividend policies.
BHP and Rio should scrap their progressive dividends and go to a payout ratio instead: A shift to a dividend payout equal to 50% of free cash flow would imply a still respectable 3.3% dividend yield for BHP and for Rio. Most importantly, dividend cuts to these levels would save BHP $3.5 billion and Rio $1.8 billion per year. This would give these companies significant financial flexibility to buy good assets at what is clearly a weak point in the cycle. We would expect them to be most interested in large, long reserve life, low risk copper assets since the NPV of acquiring these assets would likely be higher than the NPV to build. Anglo American, Freeport, First Quantum and some other major miners have high quality copper assets that could be sold. An opportunity to drive share prices higher even if commodity prices do not recover: Buying high quality assets on the cheap would create more shareholder value than using all FCF to pay dividends, based on our analysis. This acquisition strategy would likely drive BHP's and Rio's share price higher over time, even if the strategy is accompanied by a lower, payout-based dividend. Dividend payments that absorb all of a company’s free cash flow may support share prices in the short-term, but we do not believe they create longterm shareholder value."

StockMarketWire.com
BHP Billiton remains on track to meet full-year production and cost guidance after a solid operational performance in the three months to the end of September.

Highlights:
· Petroleum capital expenditure of US$2.9 billion now planned for the 2016 financial year, a 6% decline from prior guidance of US$3.1 billion. · Four major projects under development are tracking to plan. · The Group continues to pursue high-quality oil plays with additional prospective acreage acquired in the Beagle sub-basin in Western Australia and the Western Gulf of Mexico. · Approval received for the extension of operational permits for Cerro Colorado until 2023. · In October, BHP Billiton priced multi-currency hybrid notes in the Euro, Sterling and US Dollar markets.

Chief executive Andrew Mackenzie said: "BHP Billiton remains on track to meet full-year production and cost guidance after a solid operational performance this quarter. In Petroleum, we continue to reduce costs in both our Onshore US and Conventional businesses, and will meet our production targets with US$200 million less capital investment. We successfully acquired prospective oil acreage in Western Australia and the Western Gulf of Mexico and will continue to invest through the cycle to create value for shareholders."

StockMarketWire.com
BHP Billiton's iron ore production guidance for the 2016 financial year is under review following a dam collapse at a Brazilian iron ore mine co-owned by the company.

The Samarco operations include a three tiered tailings dam complex. Within this complex, the Fundão dam failed and the downstream Santarém dam has been affected. This resulted in a significant release of mine tailings, flooding the community of Bento Rodrigues and impacting other communities downstream. The third dam in the complex, the Germano dam, is being monitored by Samarco. At this time, there is no confirmation of the causes of the tailings release. BHP Billiton's chief executive, Andrew Mackenzie, will go to Brazil this week to understand first-hand the human, environmental and operational impacts of the incident. Meanwhile, BHP Billiton has offered its full support to help the immediate rescue efforts and to assist with the investigation. BHP Billiton's immediate priority is the welfare of the Samarco workforce and the local communities. Details are still emerging in relation to the Samarco employees and contractors impacted by the incident. At this stage, Samarco has advised that there is at least one confirmed fatality with a further 13 members of the workforce missing. The number of people in the communities impacted by the incident is yet to be confirmed, but the local authorities have reported that, at this stage, there are at least 15 people from the communities unaccounted for. BHP Billiton will continue to work with Samarco (operator), Vale, the local communities, local authorities, regulators and insurers to assess the full impact of this tragic incident. Further updates will be provided as soon as more information becomes available. The Samarco operations have the capacity to produce 30.5 Mtpa of iron ore pellets and to process 32 Mtpa of concentrate. In the 2015 financial year, BHP Billiton's share of production was 14.5 Mt and the contribution from Samarco was approximately 3 per cent of the BHP Billiton Group's Underlying EBIT. Following this incident, BHP Billiton's iron ore production guidance for the 2016 financial year is under review.

Cazenove note today:
"We believe the Samarco tailings dam failure will prove to be the straw that breaks the camel’s back on BHP’s progressive dividend. At spot, assuming $500m costs related to Samarco and aggregate FY’16-17E capex $2bn below guidance, we estimate a ~$8bn shortfall to comply with A- credit metrics by the end of CY’17E. With the risk of further downside to base metals, we believe pressure will grow on BHP’s Board and we now forecast a 50% cut to the progressive dividend at FY’16 results. Against that backdrop, we do not believe 8% YTD underperformance vs RIO and +30-35% vs AAL/GLEN adequately reflects the risk investors, particularly those with an income focus, and we downgrade to Underweight with a revised Dec’16 PT of £7.50/sh.
 Material cash/capital shortfall: On spot prices and assuming no change to the US$6.6bn pa progressive dividend we estimate BHP faces a $16-20bn capital shortfall to sustain its A+ credit rating and a cumulative ~$9bn deficit of FCF vs dividend commitments for CY'16-17E. Even assuming management is willing to tolerate an A- rating, which they have indicated is below their definition of “solid A”, we estimate an $8bn capital shortfall, despite our capex forecast sitting $2bn below guidance for FY’16-17E.
 Factoring in a 50% dividend cut: In that context, with downside risk to copper prices and with management commentary increasingly equivocal on the trade-off between capital returns and investment in growth, we believe BHP will ultimately rebase the dividend 50% lower (to ~US$3.3bn pa) at FY’16 results next August. In combination with further reductions in working capital, opex and capex, this should allow the company to manage its balance sheet effectively, whilst still offering a ~4.5-5.0% yield.
 Removing Samarco: We have removed Samarco from our model. While NPV analysis suggests a likely justification for a restart, we believe the environmental, political and social dimensions mean there is no certainty that Samarco will regain its licence to operate. We make a preliminary estimate of US$0.5bn (BHP share) in rehabilitation/fines over three years.
 Downgrade to UW: We reduce our EPS by 7%/9%, respectively, for FY’16/17E and NPV by 4%, with the company now on spot EV/EBITDAs of ~10.5x, a ~5% premium vs RIO and a base case P/NPV of 0.69x (~25% prem. to diversified peer group). We recalibrate our price target methodology to a blended average of our base-case and spot valuation, which reduces our Dec'16 PT to £7.50/sh (previously £13.00/sh). We cut our recommendation to UW and retain our preference for RIO."

sorry to say, but i fear this goliath still has a long way to fall
underlying commodity prices apart, the cost of the disaster in brazil has yet to be played out

UPDATE: SAMARCO

the tailings are composed of materials that are not hazardous to human health, based on the hazard classification of the material under Brazilian standards

the implication being that international standards could well say otherwise!

Have a look at photo 5 here.

Chart of the week: Odds favour a sharp rally soon

Are you prepared to guarantee that?

StockMarketWire.com
BHP Billiton expects to take a hit of approximately USD4.9 billion post-tax (or approximately USD7.2 billion pre-tax) against the carrying value of its onshore US assets.

This charge will be recognised as an exceptional item in the financial results for the half year ended 31 December. The impairment follows the bi-annual review of the company's asset values and reflects changes to price assumptions, discount rates and development plans which have more than offset substantial productivity improvements.

The impairment will reduce onshore US net operating assets to approximately USD16 billion.

The group said the oil and gas industry had experienced significant volatility and much weaker prices. It says the US gas price remains low as industry-wide productivity improvements have resulted in higher than expected supply at lower cost. BHP Billiton has previously suspended development of its dry gas acreage. The company has now also reduced its medium and long-term gas price assumptions. It adds: "In addition, the oil price has fallen by more than 30 per cent over the last three months following the disruption of OPEC and stronger than anticipated non-OPEC production. Although we expect prices to improve from their current lows, we have reduced our oil price assumptions for the short to medium term. Our long-term price assumptions continue to reflect the market's attractive supply and demand fundamentals." The increased volatility in prices has also increased the discount rates applied by BHP Billiton, which has a significant flow through impact on the Company's assessment of its Onshore US asset value. The group will reduce the number of operated rigs in its Onshore US business from seven to five in the March 2016 quarter. This will comprise three rigs in the Black Hawk and two rigs in the Permian. Beyond this, investment and development plans for the remainder of the 2016 financial year are under review, with a focus on preserving cash flow. The oil and gas industry has recently experienced significant volatility and much weaker prices.

Chief executive Andrew Mackenzie said "Oil and gas markets have been significantly weaker than the industry expected. We responded quickly by dramatically cutting our operating and capital costs, and reducing the number of operated rigs in the Onshore US business from 26 a year ago to five by the end of the current quarter. "While we have made significant progress, the dramatic fall in prices has led to the disappointing write down announced today. However, we remain confident in the long-term outlook and the quality of our acreage. We are well positioned to respond to a recovery."

StockMarketWire.com
BHP Billiton is maintaining its full year production guidance for petroleum, copper and coal.

Guidance at Western Australia Iron Ore (WAIO) is also maintained at 270 Mt (100% basis) as continued productivity is expected to offset one-off operational issues from the December quarter. But total iron ore guidance is reduced by 10 Mt to 237 Mt due to the suspension of production at Samarco following the dam collapse.

It says four major projects under development are tracking to plan. The North West Shelf Greater Western Flank-A petroleum project was completed under budget and ahead of schedule. The Greater Western Flank-B project was approved during the period.

Underlying attributable profit in the December 2015 half year is expected to include additional charges in a range of approximately US$300 million to US$450 million.

Chief executive Andrew Mackenzie said: "Our operated assets continued to perform well over the last six months. The strong performance of our conventional petroleum assets has offset lower shale volumes following a reduction in investment to preserve the value of our acreage in current market conditions. Increased throughput at Escondida helped mitigate the impact of expected grade decline and better productivity supported production at Queensland Coal. These efforts have allowed us to maintain production guidance for Petroleum, Copper, Coal and Western Australia Iron Ore.

"Commodity prices fell substantially in the first half of the 2016 financial year putting pressure on the whole resources sector. We continue to cut costs and remain focused on safely improving our operational performance to enhance the resilience of our business. In this environment, we are also committed to protecting our strong balance sheet so we have the financial flexibility to manage further volatility and take advantage of the expected recovery in copper and oil over the medium term."

Half year results, big loses and big cut in divi http://www.moneyam.com/action/news/showArticle?id=5218077

Jefferies comment today:
"BHP reported 1H FY16 EBITDA that was 11% lower than we had anticipated. More importantly, the company announced a new management structure, capex reductions, planned productivity gains, a new dividend policy, and clear capital allocation priorities. These changes are aimed at freeing up cash and should therefore be a positive for BHP shares. We expect the company to use its financial flexibility to acquire an asset (most likely in copper) in the near term.
Management shakeup: In an effort to simplify and in some ways decentralize its structure, BHP announced that it will now group its mining assets into two segments - Minerals Australia, to be run by Mike Henry, and Minerals Americas, to be run by Danny Malchuk. Global Petroleum will be run by Steve Pastor. BHP President of Iron Ore, Jimmy Wilson, and President of Petroleum, Tim Cutt, are leaving the company. We expect this to all be a relatively seamless transition, and the end result should be further cost cutting as redundant functions throughout BHP are eliminated. Tough times call for tough measures.
More productivity gains and capex reductions: BHP expects to deliver $2.1bn of productivity gains in FY '16. These gains will be partially offset by a $1.5bn negative impact due to lower grades at Escondida. The company has lowered its capex guidance from $8.5bn to $7.0bn for FY16 and from $7.0bn to $5.0bn for FY17. Lower costs and lower capex will give BHP additional financial flexibility, as will its new dividend policy (see below).
An end to the progressive dividend, as expected: BHP has lowered its interim dividend by 74%, from $0.62/sh to $0.16/sh (implies an annualized dividend of $1.7bn and dividend yield of 2.8%). We had expected at least a 50% cut to the dividend. The announced $0.16/sh 1H dividend is covered by FCF. Going forward, BHP's dividend will be based on a payout ratio (rather than a progressive policy), with the dividend equal to a minimum of 50% of Underlying attributable profit. This implies a minimum FY17 dividend of $0.18/sh (1.6% yield) if we assume current spot commodity prices and FX. The new policy will ensure that capital returns from BHP are linked to the cyclicality of the business.
Clear capital allocation priorities: BHP's capital allocation priorities will be to 1) spend maintenance capital, 2) maintain a strong balance sheet, and then 3) pay the new minimum dividend. Excess free cash flow will then be allocated to either debt reduction, additional dividends, share repurchases, growth investment, or M&A. At spot prices, BHP would generate excess free cash flow over the next two years (with average FCF before dividends of more than $4bn per year at current spot commodity prices, on our estimates). We do not expect debt repayments (reported net debt of $25.9bn would be 2.2x annualized 1H FY16 EBITDA of $6.0bn), share buybacks, significant additional dividends, or growth investment (better to buy than build now) to be higher priorities than M&A over this period as compelling opportunities may arise. M&A may be on the near-term agenda: BHP believes that "depressed asset values and falling share prices provide opportunities" for mining companies with financial strength.
The company is most constructive on the outlook for copper and oil. If we assume no change in dividend from 1H FY16 to 2H FY16 and from FY16 to FY17, the company's annual dividend payment would fall by $4.9bn relative to FY15. This reduction combined with the announced capex and opex cuts gives BHP significant financial flexibility to buy an asset. We would not rule out an acquisition of a world class copper asset in the $5bn range, if the opportunity emerges."

Another note from Jefferies:
"Even after yesterday’s carnage, BHP’s share price is above our target as commodity prices have been stronger than expected, sentiment regarding mining has improved, and shorts have covered. While the Chinese demand outlook may be slightly better than it was two months ago and more metals intensive stimulus may be coming, our analysis indicates that most commodity prices will go lower in the near term. We downgrade to Hold.
BHP’s mark-to-market valuation is reasonable: The mining sector is coming off its biggest six week rally in 30+ years, with the FTSE Mining Index up 70% from Jan 20 Mar 7 versus the FTSE All-Share Index up 9% over that period. Commodity prices have also significantly increased, with iron ore up 46%, oil up 9%, and copper up 6% YTD (iron ore, oil and copper account for more than 90% of BHP’s NPV, on our estimates). At current spot commodity prices, BHP is on a FY16E FCF yield of 5.9% and EV/EBITDA of 6.4x and a FY17E FCF yield of 11.1% and EV/EBITDA of 5.2x. If we assume a 50% payout ratio (consistent with guidance), BHP’s FY17E dividend yield at spot would be 3.0%. Based on these valuations, we would buy BHP shares only if we were confident that the recent recovery in commodity prices is sustainable.
Commodity prices to go lower: Based on our analysis, the recent strength in prices of iron ore, copper and other mined commodities will at least partially reverse over the next 3-6 months. In the case of iron ore, supply growth from Roy Hill and a seasonal increase in supply following what has been a period of typical weather-related supply disruptions should pressure the price, especially if demand stays weak. We expect the iron ore price to fall to below $40/t this summer (versus current spot of $64/t). In the case of copper, a wave of supply growth (Cerro Verde, Las Bambas, Buenavista, Sentinel, Grasberg, Bozshakol, Antucoya and others) should more than offset any improvement in demand and lead to lower prices. Based on our commodity price forecasts rather than current, higher spot prices, BHP’s valuation is stretched (FY16E FCF yield of 2.5% and EV/EBITDA of 8.1x and a FY17E FCF yield of 7.2% and EV/EBITDA of 6.9x, with an implied FY17E dividend yield of just 1.0%).
BHP’s strategy is a risk: In addition to a fairly expensive valuation (on our estimates) and the likely negative momentum of lower commodity prices in the near term, there are also still questions regarding BHP’s recently announced strategic overhaul, which includes major changes to divisional management and a regrouping of segments. There is also a relatively high risk that BHP pursues M&A opportunities, especially in copper and possibly conventional oil. An acquisition of a tier-1 copper asset would not be cheap (greater than 10x spot EBITDA), and the winner of what would likely be a bidding war would be at risk of overpaying. We would prefer to see BHP use cash flow to pay down debt rather than compete to buy high quality copper assets from the likes of Freeport or Glencore. All else equal, we prefer sellers of good assets over buyers.
Downgrading BHP shares after the recent rally: We have downgraded BHP shares from Buy to Hold (but not changed our target prices) as we cannot identify likely near-term positive catalysts, the company’s strategy is still a risk, commodity prices should go lower in the near-term following the recent strength, and BHP’s valuation based on our estimates is no longer inexpensive. BHP is well positioned for the long term, but the Buy case is not evident for now."

Chart of the week: Huge upside for BHP and Tesco?