BHP Billiton Increases Investment - Analyst Blog

A total of $635 million has been approved for investment in Western Australia's iron ore production with $570 million share of BHP Billiton Ltd. (BHP), which agreed to invest after withdrawing from the buy-out offer for Canada's Potash Corp. of Saskatchewan Inc. (POT).

Other partners in the investment are Itochu Minerals & Energy of Australia Pty Ltd; Mitsui-Itochu Iron Pty Ltd and Mitsui Iron Ore Corporation Pty Ltd. BHP Billiton share of investment takes into account the 100% owned BHP Billiton Iron Ore Jimblebar operation.

BHP Billiton's commitment to long-term growth through its key investment strategy looks promising with 20 projects on hand. During fiscal 2010, BHP delivered five growth projects and approved two major growth projects with a total budget of $695 million and made pre-commitments totalling $2,237 million to start work on four more projects. BHP Billiton, at present has 20 projects on hand totalling $25 billion.

Further, we believe that the ongoing industrialization in China, the largest iron-ore importer, will improve the demand and price of its products in future. Fiscal 2010 bears evidence of the fact that both demand and prices improved due to strong growth in China and India.

BHP Billiton maintains a progressive dividend policy with fiscal 2010 dividend of $0.87 per share, up from $0.82 in fiscal 2009, which represented an increase of 17.1% from fiscal 2008.

A continuous growth in dividend raises shareholder sentiments and confidence, which inspire our optimism about the stock. Thus, we reiterate our Outperform recommendation on the stock. The stock retains its Zacks #2 Rank, equivalent to a short-term Buy rating.

 
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