On Jan 1, Zacks Investment Research downgraded BHP Billiton Limited (BHP) to a Zacks Rank #4 (Sell) from a Zacks Rank #3 (Hold). The downgrade was largely due to the loss of operations at the Nickel West Leinster Perseverance Underground mine.
Why the Downgrade?
Although BHP Billiton reported improved year-over-year production in the first quarter of fiscal 2014, the company faced a major blow post the quarter. BHP Billiton’s production at the Nickel West Leinster Perseverance Underground mine has been halted following a significant seismic event.
The mine experienced the seismic event on Oct 31, 2013, following which a feasibility study was conducted for the production continuity at the mine. However, the same has been suspended and further production will start at the Rocky’s Reward open cut mine, near Leinster, as an alternative to the mine. This production suspension will negatively hamper the production of nickel in the second quarter of fiscal 2014.
In the first quarter of fiscal 2014, BHP Billiton produced 40.4 metric tonnes of nickel, registering a year-over-year hike of 9%.
Besides the disrupted nickel operations, the company has been adversely affected by a reduction in the prices of most of its commodities. Global growth was slower than expected and commodity markets were weak in fiscal 2013.
Other Stocks to Consider
BHP Billiton is involved in mineral exploration, production and processing, oil and gas exploration and development, and steel production and merchandising. The company currently has a market capitalization of $181.5 billion. Some better-ranked stocks in the industry include McEwen Mining Inc. (MUX), Denison Mines Corp. (DNN) and General Moly, Inc. (GMO), each with a Zacks Rank #2 (Buy).