BHP, NCM and SOLG18 Sep 2020 20:33
BHP Group, Newcrest Mining, SolGold: Getting bogged down or putting all your eggs in one basket
When it comes to investing in commodity companies, the BHP Group (NYSE: BHP) is a household name. The British company is active worldwide, mining coal, iron ore, copper and other commodities and has long been considered a solid dividend earner. But recently the company has disappointed: Special effects put pressure on profits, unrest in Chile made life difficult for BHP and the Corona pandemic also left its mark: the bottom line at the end of the financial year at the end of June was a profit of no less than EUR 6.75 billion. While the mood among investors was not particularly good, BHP cut its dividend by around ten percent, thus spoiling shareholders’ sentiment even further. On a year-on-year basis, the share price fell by around 1.4%. In view of the good performance of copper following the outbreak of the pandemic, this is too little for many investors.
Is the BHP Group buying into price fantasies?
Nevertheless, there are also positive things to report about BHP. The company already successfully implemented cost-cutting measures during the past fiscal year and thus became even more profitable. It can also be assumed that the recent positive development of many raw material prices will not be felt until the current fiscal year. Even though BHP itself has a cautiously positive outlook for the future and expects economic activity to vary greatly from region to region, investors see no potential for surprises in the share price. It is possible that, as in the past, acquisitions will help BHP to get off to a good start.
Newcrest profits from the gold bull market only to a limited extent
When it comes to mergers and acquisitions, the name Newcrest Mining (OTC PINK: NCMGY) is always mentioned in the resource industry. The company is Australia's largest gold producer and increased its profits to USD 647 million in the past fiscal year. In recent months, it has been repeatedly rumoured that the company is on the radar of North American resource companies as a potential takeover target. Around 85% of Newcrest Mining’s production is gold, with copper being another important raw material. Although the dividend at Newcrest is traditionally lower than at BHP, the Australian company recently increased its dividend by 14%.
Despite this positive signal to the market, the share price remains at a low level - on a twelve-month horizon, the share price even lost 4.6%. Tragic detail: Newcrest has sold forward parts of the production of its Telfer mine in Australia until 2022/23 and is not benefiting from rising gold prices there.
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