Shares in BHP Billiton (BHP) continued to ignore last week’s downgrade by ratings group, Moody’s, rising for yet another day thanks to the continued rebound in key commodity prices.
The shares ended up more than 5% yesterday at $18.55. That was after a 13% plus surge last week on the ASX and a 9% rise on the London market on Friday night.
Shares in rival Rio (RIO) rose 3.1%, while Fortescue Metals (FMG) shares jumped more than 23% yesterday, following BHP higher.
Their shares will go higher today after global iron ore prices jumped 19% yesterday to over $US61 a tonne.
Yesterday’s surge came off the back of a further rise in iron ore (to more than $US53 a tonne) over the weekend and big rises last week in the price of oil, copper, lead, zinc and nickel.
The shares fell to a multi-year low of $14.06 earlier this year amid gloomy forecasts that it was going lower and was in trouble, especially after cutting its dividend 75% for the December half year and abandoning its progressive payout policy (as did Rio Tinto).
There were big losses taken on US gas, and more might be needed if the current 17 year lows for US natural gas futures (under $US1.70 per million British Thermal Units, is sustained for the next couple of months).
Then there were the ripples from the Samarco dam disaster in Brazil and continuing bad publicity about that disaster.
But a deal has been struck with the Brazilian government and although there will be more claims to come and be paid out, investors feel they have a handle on the likely cost to BHP and partner Vale, instead of a complete unknown, as we have had since last November when the dam burst happened.
Ratings groups cut BHP’s ratings – S&P by one level, but with a negative outlook, and Moody’s last week cut the rating by two levels.
“Moody’s views there to have been a fundamental downward shift in the global mining sector, with the downturn being deeper and the recovery likely to take longer than previously expected,” the company said in a news release late last week.
But that seemed a little late as BHP shares had rebounded more than 20% from that low hit earlier this year, and have risen sharply since Moody’s downgrade.
Better times for iron ore players
BHP shares fell 8.2% on the day in February of its interim financial results (with a 92% slide in underlying net profit) and news of the change in dividend policy and lower dividend. They ended on $16.18 on February 23. Since then they have bounced sharply.
This does not mean the company is going to boom – but it also means investors, especially hedge funds and others, have probably done a bundle on shorting the shares of big miners (and that includes the likes of Rio, Glencore, Freeport, Anglo American and several other groups. For example, Anglo shares are up 99% since bottoming earlier this year.
There must be some big losses among all those ‘experts’ in hedge funds and analysts and their media mates. Not even the climb in the value of the Aussie dollar has managed to hurt BHP’s rally.
