Friday, June 1, 2012

BHP (BHP) Over the Long Term

Mining giant BHP (NYSE: BHP), as with most commodity companies, has been under a lot of pressure, as the ongoing weak global economy, concerns over Europe, and slowing growth in China, has investors concerned over the short - and mid-term growth prospects of the company.

A couple of major items have been weighing on the company. First is the recent announcement that the company won't be putting its money into growth projects, which it had originally expected to pour $80 billion into over the next five years.

Chairman Jacques Nasser said the $80 billion expansion proposed by CEO Marius Kloppers in 2011 won't be happening, although it isn't clear how much will go into expansion going forward.

Nasser added that he expects commodity markets to continue to weaken, as confidence in a global economic recovery deteriorates.

The second major challenges facing BHP is the uncertainty surrounding Olympic Dam project in Australia.

BHP wants to delay the development of the project, while the Australian government is threatening the company, as South Australian Premier Jay Weatherill, who appears clueless and emotionally driven, saying in the Australian National Affairs, May 25th edition, that the reasons given by BHP for the potential delay are "artificial."

This bizarre assessment appears to be completely politically motivated, as the reasons proffered by BHP are totally reasonable, and based upon market and economic conditions and nothing else.

BHP is wise and prudent in delaying the project, and the company surely won't jeopardize itself and shareholders to placate politicians.

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