Is Rare Earth Minerals PLC The Perfect Partner For BHP Billiton plc In Your Portfolio?

BHP Billiton

2014 has been nothing short of fantastic for Rare Earth Minerals (LSE: REM), with shares in the mining exploration company rising by a whopping 123% since the turn of the year.

This performance contrasts sharply with BHP Billiton (LSE: BLT) with the hugely diversified global mining stock seeing its share price fall by 11% over the same time period, owing to a very weak iron ore price.

Looking ahead, could a combination of the two companies prove to be the best of both? A perfect mix of growth potential and diversity that could grow your bottom line and also provide you with a degree of stability?

Growth Potential

It’s clear that Rare Earth Minerals has growth potential. Just recently it announced it was stepping up its lithium exploration capacity via a major expansion of its Sonora lithium project in New Mexico. Indeed, Rare Earth Minerals is planning to build a brand new mining and processing plant with capacity of more than 50,000 tonnes per year of lithium carbonate equivalent.

However, even this could be expanded further, since the site is estimated to have one of the largest deposits of lithium in the world. As a result, the future looks bright for Rare Earth Minerals.


Of course, as a relatively small mining stock, Rare Earth Minerals lacks diversity. Indeed, it remains a relatively high-risk play and continues to be loss-making. That’s where a company such as BHP Billiton could be a prudent partner for Rare Earth Minerals in Foolish portfolios, since it remains hugely profitable and has a very appealing level of diversity – both geographically and in terms of the commodities that it mines. This could help to smooth out the inherently volatile performance of a smaller stock such as Rare Earth Minerals moving forward.

Looking Ahead

Furthermore, BHP Billiton also offers a very respectable yield of 4.7% and has a strong track record of earnings and dividend growth. While earnings are set to be relatively flat in the current year, it is now better positioned to improve the bottom line in the long run, owing to a more efficient and leaner operating model.

Indeed, BHP Billiton’s diversity, income potential and relative stability could prove to be the perfect ally for Rare Earth Minerals’ more volatile and high-risk future potential. As a result, the two could prove to be a sound combination over the medium to long term.

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Peter Stephens owns shares of BHP Billiton. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.