What Happened to the BHP Billiton Share Price?
Shares of BHP Billiton [ASX:BHP] rose 2.33% to $39.05 today.
Why Did This Happen to BHP Shares?
BHP Billiton [ASX:BHP] is the world’s largest diversified miner. It trades on the ASX with a market capitalisation of $122 billion.
BHP’s world class resource projects are large, low cost, and diversified across geography and commodities. It’s also the world’s third largest iron ore producer after RIO and Vale S.A. (a Brazilian company).
Today, BHP announced plans of a de-merger. It plans to reduce its asset base to focus on iron ore, coal, petroleum, copper. BHP believes that this asset structure will offer simplification, diversification and could generate ‘stronger growth in cash flow’.
The company also said that it plans to retain potash as a possible fifth pillar of the business.
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What Now for BHP Billiton?
BHP’s share price is heading towards a key resistance level of $39.50. It hasn’t been able to clearly breakthrough this level for the past two years.
Saying this, typically de-mergers add strength to a share price. In this sense, shareholders should get a kick out of BHP offloading its nickel, aluminium and manganese divisions.
In my view, BHP’s new strategy looks good. Not only does BHP recognise that energy is the future, it also understands that food is finite.
Potash will be a crucial profit stream for BHP in the decades to come as developing counties become richer. It’s a well-known fact that people tend to eat more meat as they become wealthier.
So, not only will farmers need to produce more crops for human consumption, they’ll need to produce more crops to feed the increased livestock. That means a greater demand for potash.
This is a great commodity for the long term in BHP’s portfolio. However, it’s unlikely that the company’s potash project will be in production for at least a decade.
Looking into the future, BHP’s share price should strengthen based on its capital management initiatives.
Jason Stevenson+
Resources Analyst, Money Morning
The post Why the BHP Billiton Share Price Rose Today appeared first on Stock Market News, Finance and Investments | Money Morning Australia.
