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BHP Billiton’s Positive 1Q16 Results and Stock Reactions in October 2015

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In-line production numbers

BHP Billiton (BHP) (BBL) reported solid, in-line production numbers for the first quarter of its fiscal 2016, which ended on October 21 (its fiscal year ends on June 30). According to its end-of-quarter report, the output of all the company’s key commodities was in line with market expectations. BHP also maintained its production guidance for all its commodities.

In BHP’s previous fiscal 2015 report, the company’s management had already proved that it had overcome the previous production declines across business units—particularly for its copper and petroleum divisions.

But while production in the company’s copper division was impacted by grade declines at Escondida, petroleum production was lower due to planned maintenance programs and the management’s deferments in the development of these assets for longer term value.

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Stock price performance

BHP’s share price rose by 1% after the company released its production results. While BHP maintained its production guidance, it was despite a further capital expenditure cut of $200 million in its petroleum division. This was a slightly positive development.

Iron ore mining companies, however, have fallen considerably on a YTD (year-to-date) basis. Rio Tinto has been the most resilient among the iron ore names. Its stock has fallen by 9.7% compared to 12.7%, 41%, and 63.7% declines for BHP Billiton (BHP)(BBL), Vale SA (VALE), and Cliffs Natural Resources (CLF), respectively.

CLF forms 3.4% of the SPDR S&P Metals and Mining ETF (XME), whereas Rio Tinto forms 1.8% of the SPDR S&P Global Natural resources ETF (GNR). Vale forms 2.9% of the iShares MSCI Brazil Capped ETF (EWZ).

Continue to the subsequent parts of this series, wherein we’ll discuss BHP’s 1Q16 production numbers for various commodities in greater detail and evaluate its management team’s outlook on the business.

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