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    BHP   AU000000BHP4

BHP GROUP

(BHP)
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End-of-day quote. End-of-day quote Australian Stock Exchange - 09/24
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Generalist funds flow back into mining as prices, inflation climb

05/21/2021 | 08:45am EDT
FILE PHOTO: Workers of BHP Billiton's Escondida, the world's biggest copper mine, are seen in front of the open pit, in Antofagasta,

LONDON (Reuters) - Surging prices for commodities, stronger balance sheets and rising inflation have lured back to mining stocks generalist investors that for years shunned the sector, data shows.

Shares in diversified mining companies Rio Tinto, BHP, Anglo American and Glencore have doubled in the last year, as policy support measures in advanced economies in response to the COVID-19 pandemic stoked inflation.

Commodities serve as a hedge against inflation, meaning their prices are expected to stay strong, and at the same time the transition to a low carbon economy and channelling of stimulus funds into infrastructure is generating demand for raw materials.

The size of natural resources mutual and exchange-traded funds tracked by Refinitiv Lipper data exceeded $70 billion by the end of April for the first time since September 2018 at $72.4 billion. (Graphic: Assets and flows of funds,

)

Many generalist investors - or money managers whose focus is not solely on mining companies - fled the sector when a commodity boom crashed in 2015 as China's appetite for raw materials slowed down.

"The inflation fears and metals price action has brought investors back to mining stocks," said London & Capital head of equities Roger Jones, whose fund holds mining stocks.

A Bank of America survey of fund managers published in May found that a net 21% of European investors participating in it were overweight metals and mining versus a net 56% that said they were underweight a year ago.

The survey found fund managers were underweight defensive sectors such as utilities and pharma.

This is not only visible in Europe, as several hedge funds have piled into Canada-listed Teck Resources Ltd, for example, U.S. regulatory filings show. (Graphic: Miners vs FTSE, https://fingfx.thomsonreuters.com/gfx/ce/ygdpzognwvw/minersvsftse.JPG)

AVOIDING BOOM AND BUST

Miners have learnt a hard lesson since the last boom, when they overpaid by billions to buy assets, sometimes in complex jurisdictions or difficult geologies.

By maintaining discipline on costs, spending and acquisitions, they cut debt and gave shareholders dividends that have become loftier as commodity prices rose.

Prices for copper, which is expected to be one of the biggest beneficiaries of the lower carbon economy, hit a record this month, while battery minerals nickel, lithium and cobalt have also jumped.

Sell-side analysts have hailed the latest rally as the beginning of a supercycle, but some fund managers caution against too much enthusiasm, as supply disruptions caused by the COVID-19 restrictions ease, potentially curbing prices.

"Supply chains are still not working as smoothly because of COVID lockdowns, so we have to wait until there is a normalisation to get a better idea of what is really driving commodity prices," said Ben Ritchie, head of European equities at Aberdeen Standard Investments.

Fund managers also said China was not consuming as much metal as it was during a 2000-2008 supercycle, and mining stocks are trading on low multiples compared to tech for example, which suggests broader scepticism that prices can be sustained.

Another concern for investors has been the level of risk associated with mining that has led to environmental disasters and legal action.

As ESG (environmental, social and governance) criteria have shot to prominence, miners have drawn up sustainability reports and ethical and green targets that may reassure some investors.

"ESG has been a challenge for miners to adapt to, but it is arguably the best thing that has happened to the mining sector," said Janus Henderson fund manager Tal Lomnitzer, whose funds hold Anglo American and copper miner Freeport-McMoRan.

"Decarbonisation should bring in those investors who would otherwise avoid the sector."

(Reporting by Zandi Shabalala and Clara Denina; additional reporting by Maiya Keidan in Toronto. Editing by Barbara Lewis)

By Zandi Shabalala and Clara Denina


ę Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
ANGLO AMERICAN PLC -0.04% 2598 Delayed Quote.7.16%
BANK OF AMERICA CORPORATION 1.08% 42.14 Delayed Quote.39.03%
BATTERY MINERALS LIMITED 0.00% 0.015 End-of-day quote.-25.00%
BHP GROUP -1.72% 37.72 End-of-day quote.-11.10%
BHP GROUP PLC -1.27% 1867.8 Delayed Quote.-2.97%
GLENCORE PLC 0.36% 330.5 Delayed Quote.41.85%
JANUS HENDERSON GROUP PLC -0.19% 41.88 Delayed Quote.28.82%
RIO TINTO GROUP 0.48% 99.33 End-of-day quote.-12.74%
RIO TINTO PLC -0.57% 4830.5 Delayed Quote.-11.69%
TECK RESOURCES LIMITED 0.00% 31.34 Delayed Quote.36.41%
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Financials (USD)
Sales 2022 63 177 M - -
Net income 2022 19 731 M - -
Net Debt 2022 7 305 M - -
P/E ratio 2022 6,67x
Yield 2022 11,5%
Capitalization 135 B 135 B -
EV / Sales 2022 2,25x
EV / Sales 2023 2,57x
Nbr of Employees 40 110
Free-Float 58,2%
Chart BHP GROUP
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BHP Group Technical Analysis Chart | BHP | AU000000BHP4 | MarketScreener
Technical analysis trends BHP GROUP
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TrendsBearishBearishNeutral
Income Statement Evolution
Consensus
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Mean consensus OUTPERFORM
Number of Analysts 13
Last Close Price 27,38 $
Average target price 33,72 $
Spread / Average Target 23,2%
EPS Revisions
Managers and Directors
Mike Henry CEO, CFO & Non-Independent Executive Director
John Kenneth Norman MacKenzie Chairman
Rag Udd CTO & VP-Technology Global Transformation
Malcolm William Broomhead Independent Non-Executive Director
Anita Margaret Frew Independent Non-Executive Director
Sector and Competitors
1st jan.Capi. (M$)
BHP GROUP-11.10%137 472
RIO TINTO PLC-11.19%109 956
ANGLO AMERICAN PLC7.20%43 991
GRUPO MÉXICO, S.A.B. DE C.V.-0.75%32 431
SAUDI ARABIAN MINING COMPANY (MA'ADEN)92.59%25 592
TECK RESOURCES LIMITED36.41%13 200