BHP Shares Recommendation

Submitted by Craig Strzelecki on 1 May, 2007 - 18:03

BHP has a Buy 2 broker call and a share price target of $36 from market analyst UBS. BHP Billiton acquires a 33.3% interest in the Sangaredi Project – joint venture (JV) interest in Guinea alumina project. BHP announced that it had secured a 33.3% interest in Global Alumina's Sangaredi Project in Guinea. BHP's total consideration amounted to US$140m. The project comprises the design, construction and operation of a 3Mtpa alumina refinery, 9Mtpa bauxite mine, and associated infrastructure. The news follows a announcement in March from Global Alumina that it was seeking approvals for its JV partners. They estimate total project value at $1.2bn: Based on a simple DCF, they estimate the value of the project at US$1.2bn and BHP's share at US$393m or 7cps.The DCF is based on: Cap-ex of US$3bn (100%), variable costs of US$109/t and fixed costs of US$135m, project start date of 2011 with 3 years ramping up in production, alumina prices at a 13% linkage to spot LME aluminium.They estimate project is costing US$960/t production: If the analyst assumes the bauxite mines are valued at approximately US$60/t of production, then (including cap-ex requirements), they estimate that the alumina refineries are costing BHP approximately US$960/t of production. This is c. 30% lower than Alcan's Gove expansion at US$1,350/t but higher than earlier expansions such as BHP's Worsley (US$750/t), AWAC's Wagerup (US$550/t) and Jamalco (US$460/t).

BHP Billiton Limited is listed on the Australian Stock Exchange (ASX) under stock code BHP. You can view their investor website here. BHP was listed on the ASX on 13 August, 1885. Charles "Chip" Goodyear is the CEO of BHP Billiton and Don Argus the Chairman. BHP Billiton was created through the Dual Listed Companies (DLC) merger of BHP Limited (now BHP Billiton Limited) and Billiton Plc (now BHP Billiton Plc), which was concluded on 29 June 2001. BHP Billiton Limited and BHP Billiton Plc continue to exist as separate companies, but operate on a combined basis as BHP Billiton. The headquarters of BHP Billiton Limited, and the global headquarters of the combined BHP Billiton Group, are located in Melbourne, Australia. BHP Billiton Plc is located in London, United Kingdom. The company is principally involved in minerals exploration, production and processing (particularly coal, iron ore, copper and manganese ore) and hydrocarbon exploration, production and refining. Find out the meaning of the recommendations in this primer. Browse for other stockbroker recommendations. A previous BHP Billiton recommendation. You can use Instalment Warrants to trade BHP. Check your charts and good luck with your share trading!

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