Fortescue Metals Group: Great Execution, Bad Timing

This article was first published by Seeking Alpha on March 20, 2015

By Sarfaraz A. Khan

Despite Higher Property Sales Volume, China's Number One Problem Isn't Going Anywhere

This article was first published by Seeking Alpha on January 14, 2015

By Sarfaraz A. Khan. Research Asst. Iffat Zehra

China has been struggling to fix its sluggish economic growth rate. As per PwC's estimates, last year, the country's economy grew by 7.2% -- which looks great when compared against the U.S. as well as some of the developed European countries - for China, this growth rate is, in fact, the slowest since 1990. The sluggish growth is due, in part, to the soft demand from the property sector which has been dealing with excess supply.

Top Stocks To Watch As The U.S. Opens Up To Condensate Exports

This article was first published by Seeking Alpha on January 7, 2015

By Sarfaraz A. Khan. Research Asst. Iffat Zehra

Since 1970s, the U.S. oil companies have been mostly prohibited from exporting locally produced crude oil. The ban was aimed at safeguarding the U.S.'s national interest as a reaction to the Arab oil embargo in that period which undermined crude supplies in the U.S., given the embargo came at a time when U.S. was already struggling with deteriorating oil production.

BHP Billiton: When Iron Ore Miners Act Like They're OPEC

This article was first published by Seeking Alpha on December 17, 2014.

By Sarfaraz A. Khan

Over the last few months deteriorating crude prices, which plummeted to their five-year lows, have been making headlines. But crude isn't the only commodity touching multi-year lows -- we also have iron ore.

Canadian Mining for Long-Term Investors

This article was originally published by TheStreet and also appeared on Yahoo! Finance

NEW YORK (TheStreet) -- Teck Resources (TCK_) is one of Canada's leading mining companies, the biggest producer of steelmaking coal in North America and the second largest player in the seaborne market, behind BHP Billiton (BHP_) and Mitsubishi's BHP Billiton-Mitsubishi Alliance. Moreover, the Vancouver-based miner is also eying entry into the energy industry in the coming years.

Teck's shares have dropped by 30% this year, to $25.25 when markets closed on Christmas Eve. As a point of reference, S&P Metals and Mining ETF (XME) has delivered relatively better, showing a decline of 10% in 2013. 

That performance doesn't seem pretty. But investors must consider Teck's move into the oil sector and its growth prospects amid the expected improvement in commodity prices in the long run. At current price levels, Teck's shares are looking attractive.

The stock isn't ideal for short term investors. The business will likely remain under pressure due to persistent weakness in the commodity markets. For long term investors, however, the miner's shares are undervalued. Teck shares are trading below their book value, at just 12 times the 2014 earnings estimates. Moreover, Teck gives a juicy yield of 3.4%, way above the industry's average.

Strong Demand from China Will Fuel the Growth of the World’s Biggest Miner

By Sarfaraz A. Khan and Gohar Yousuf

The world’s largest mining company BHP Billiton (BHP) is quite optimistic about its future. The business anticipates a 75% increase in commodity demand in the next 15 years driven by China’s economic growth. The company gets nearly 30% of its revenue from China. 

However, the country's impact on BHP Billiton's earnings is even bigger than that. The company’s future is closely tied with China, which is the biggest consumer of iron ore. Despite the current slowdown, China’s economy has expanded by more than 5 times in the last 10 years. Currently, it is eyeing a 7.5% growth in its gross domestic product for 2013, which could slow down to 7.4% in 2014. However, anything above, or even close to 7%, is considerably more than the expected growth rate of some of the other leading economies. Moreover, by 2028, around 250 million people in China will move to the cities from rural areas, which will fuel the demand of commodities in general, and iron-ore in particular. BHP Billiton wants to capitalize on this growth and is aiming to expand its annual production by 8% for the next two years.

In the previous quarter, BHP Billiton posted an  ... read full article on GuruFocus

Rio Tinto: A Low-Cost Iron Ore Giant Eyeing Uptake In Production

By Sarfaraz A. Khan and Gohar Yousuf

The world’s second biggest mining company and one of the biggest iron ore producers Rio Tinto (RIO) has recently posted record production result for its third quarter due to an increase in the production and shipments of iron ore, particularly in Western Australia. The company has reaffirmed its annual iron-ore production guidance at 265 million tons.

Rio Tinto has increased its iron ore production by 2% year-over-year to 68.3 million tons while global iron-ore shipments rose 4% year over year to 68 million tons. This is due to the record production of 64.3 million tons from its Australian Pilbara operations. The business is also one of the lowest cost iron ore producers, so the increase in production should help it to deliver better results for the third quarter. The details of Rio Tinto’s third quarter production are shown in the table below. 

Previously, for the six months ending in June 2013, Rio Tinto’s net profit dropped by 71% to $1.72 billion from same period of 2012 while revenue was $27 billion. The company gets most of its revenues from iron ore, followed by aluminum and copper. 

(figure 1)

The company has been suffering due to the lower commodity prices, higher tax rate and the fall in demand at its biggest market, China. However, the company’s aggressive cost-saving measures were able to offset some of the decline in profits.

Cost Reductions

Rio Tinto has planned to reduce its operating cost by $5 billion by …. Read full article with images at GuruFocus

Will This Mining Giant Abandon Its Only Remaining Mega Project?

From The Motley Fool

Mining giant BHP Billiton (ADR) (NYSE: BHP) is getting ready to make one of its most difficult decisions; whether or not to pull the plug on its $14-billion Jansen potash project located in Canada. In fact, this is the company’s only remaining mega-project that hasn’t been scrapped.

Potash woes

With each passing day, the massive project in the Saskatchewan province is looking less and less lucrative. In the sluggish economic environment, the company’s investors were already unwilling to commit to large projects with enormous capital requirements. Then there was the oversupply in the potash market, which made it even more unattractive.