Thursday, September 2, 2010

BHP (NYSE:BHP), Freeport (NYSE:FCX) May be Abandoning Cyclical Practices

The mining sector in general, including gold miners, seems to be moving away from cyclical business practices into more of a level approach, and majors like BHP Billiton (NYSE:BHP) and Freeport-McMoRan (NYSE:FCX) could draw a lot more investors if they continue on in that direction.

Mining and construction equipment makers like Joy Global (Nasdaq:JOYG), Bucyrus (Nasdaq:BUCY) and Caterpillar (NYSE:CAT) may also be moving more in that direction in response to the miners.

With commodities among the expected top market performers over the next decade, a number of mining companies have been also moving more toward operating as businesses that are easier to understand, and offering perks like increased dividends to their shareholders.

For miners and equipment providers, this deals with questions like managing orders in a way that could say no to some in order to extend the period of time the orders are received. That would lower the cyclical effects which have been part of the industry for so long, and provide shareholders with a more level and gradually growing share price, rather than the usual swings.

Commodity prices are of course a major factor in all this, and affect all businesses connected to the market. Extending orders over a period of time would also help in that regard, as it could offer an average price over a longer period of time that would also be level.

If all businesses involved with mining and mining equipment move in this direction, it would result in a much more stable and predictable environment, which would be attractive to investors and more easy to manage for the companies.

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