The Motley Fool

Is it finally time to buy BHP Billiton plc?

To say the last few years have been challenging for global mining giant BHP Billiton (LSE: BLT) would be a gross understatement. The world’s biggest mining company has seen both its revenues and earnings in a steep decline since 2011 as the slowdown in China has led to a significant fall in commodity prices.

Enormous loss

Last year the Anglo-Australian mining giant posted enormous losses of $6.4bn, the highest in the company’s history, as the global slump in commodity prices and the Samarco mine disaster in Brazil took their toll. As a result, the company slashed its final dividend payout to 14¢ per share, a massive 77% cut from the 62¢ per share it declared the previous year. This left the full-year payout at 30¢ per share, some 76% lower than fiscal 2015.

However, last month’s interim results made for much better reading. Attributable profit came in at $3.2bn for the first six months of the year, compared to a loss of $5.7bn for the same period in 2015/16. The turnaround in fortunes was attributed to a recovery in commodity prices and stronger demand from China. There have also been major efficiency gains, with a further $1.8bn worth of savings expected through to the end of 2017.

Getting into shape

In recent years the diversified mining giant has been forced to cut back on some of its capital investment programmes, sell assets and strengthen its balance sheet. Many believe that the worst may be over for commodities, but come what may, BHP is certainly in better shape to tackle whatever the future may hold for commodities prices.

From an investment perspective, BHP is certainly a lot more attractive than it has been for a long time. Despite a strong rally since the start of 2016, at around £12.45 the share price is still a long way below its 2011 peak of £26.31. The valuation isn’t too demanding either, with a forecast P/E of 11.7 for the current year to the end of June.

Let it shine

For those of you who like their metals a little shinier, then the FTSE 100 offers a pureplay gold miner in the shape of Randgold Resources (LSE: RRS). The Africa-focused mining and exploration company hiked its dividend by a massive 52% last month after reporting a big leap in profits and increased production for the sixth successive year.

The precious metals miner delivered a 38% rise in profits to $294.2m for 2016, with record levels of gold production at 1.25m ounces. The board duly hiked the final dividend to 100¢ per share from 66¢ the previous year.

During periods of political and economic upheaval, investors often flock to safe havens such as gold. With the current uncertainties around Brexit, the Trump administration, and forthcoming elections in Europe, it could be a good time to invest in London’s largest listed gold miner.

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Bilaal Mohamed has no position in any shares mentioned. 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.