COMPANY OVERVIEW - BHP Billiton Limited is a global resources company. The Company is engaged in exploration, development, production, processing and marketing of minerals, such as iron ore, metallurgical and energy coal, copper, aluminum, manganese, uranium, nickel, silver and potash. It is also engaged in exploration, development, production and marketing of conventional and unconventional oil and gas. The Companyoperates through segments: Petroleum and Potash, Copper, Iron Ore and Coal. The Company's Petroleum and Potash segment is engaged in exploration, development and production of oil and gas and potash pre-development. The Copper segment is engaged in mining of copper, silver, lead, zinc, molybdenum, uranium and gold. The Iron Ore segment is engaged in mining of iron ore. The Coal segment is engaged in mining of metallurgical coal and thermal (energy) coal.
 

BHP Details
 
Operational automation and investment for Mobile apps in Shanghai hub: BHP Billiton Ltd (ASX: BHP) has invested $6.5 million into a Shanghai-based “hub” to create mobile apps for the enhancement of the workers’ productivity and ability to communicate at sites at a global level. Initially the hub would start with a staff of 50 technology application designers. There would be three hub-type operations and will be trialed and tested before being more widely deployed across the company and would help everyone from operators in underground mines to administrative staff at head office to access and respond to real-time information as and when they need it to communicate no matter where they are.

 
Update on Samarco Operations:BHP recently reported that Samarco, the Brazilian iron ore joint venture between Vale and BHP, could restart by the second half of next year. It has been idle since November 2015, when the collapse of a tailings dam led to a devastating flood. Samarco has a capacity to produce 30 million tonnes a year, and is a major employer in the region. We believe that BHP has the ability to handle the Samarco event, even though significant legal hurdles could remain going forward. Moreover, BHP would recognize a provision in the range of US$1.1 billion to US$1.3 billion, which is about 50% share of the current estimate of Samarco’s funding obligations under the terms of the Framework Agreement entered into on 2^nd March 2016. The ongoing uncertainty surrounding the nature and timing of a potential restart of Samarco’s operations still prevails. Additionally, the associated income statement charge would account as an exceptional item in the June 2016 half-year, together with direct costs of approximately US$100 million (post tax). A further short-term facility of up to US$116 million is being made available to Samarco to carry out remediation and stabilization work and to support Samarco’s operations. Meanwhile, BHP board has also approved US$134 million to support the Foundation to allow the continuation of reparatory and compensatory programs. This amount would offset against the provision done. But, we believe that BHP is well positioned to handle the huge costs as well, as the group is controlling costs in other operations.
 
Exceeded FY16 Production guidance:BHP has exceeded FY 16 full year production guidance for petroleum, copper and metallurgical coal, and delivered a full year production at Western Australia Iron Ore (WAIO). The Petroleum production in FY 16 has shown strong conventional performance which has offset the deferral of development activity by reducing the number of rigs in Onshore US for value. BHP has taken advantage of the fall in deep water drilling costs and accelerated the conventional oil exploration program to simultaneously run campaigns in the Gulf of Mexico and the Caribbean. The Copper production has shown an increased throughput at Escondida and the strong operating performance across the business partially offset lower grades at Escondida. There is a record WAIO volumes of iron ore which is affected by the suspension of operations at Samarco. The record production of Metallurgical coal at five Queensland Coal mines more than offset the cessation of production at Crinum. The divestment of the San Juan Mine, unfavorable weather at NSWEC and Cerrejón and operational rescheduling at NSWEC has affected the production of the Energy coal. In FY 17, the group estimates that the production would enhance by 5% for copper, while delivering up to 4% growth in iron ore and 3% rise in metallurgical coal.
 

Production for FY 16 (Source: Company Reports)
 
BHP’s major development projects:At the end of the FY 2016, BHP had four major projects under development in Petroleum, Copper and Potash, with a combined budget of US$6.9 billion over the life of the projects. In FY 16, BHP has delivered the first production by the North West Shelf Greater Western Flank-A petroleum project and the company received the approval of the Greater Western Flank-B project. In Petroleum, the exploration drilling has started in Trinidad and Tobago and in the Gulf of Mexico after the positive results at Shenzi North during the year. In addition, the Los Colorados Extension project is approved by the Escondida Owners Council and the first production is expected in the second half of the FY17. Meanwhile, BHP is seeking to invest over US$700-900 million annually from FY16 to FY18 for its exploration activities. Being a low cost producer, the group is planning to leverage brownfield potential in its huge, long-life assets and is aiming for Greenfield discoveries in copper and oil to further strengthen its portfolio of tier 1 assets. The group is well positioned in terms of accessibility and financial position given its access to preferred ore bodies and fields boosted by major stakeholder relationships.
 

Exploration Potential Value Creation (Source: Company Reports)
 
Incurring Additional Charges: BHP expects the underlying attributable profit in the June 2016 half year to include additional items related to the reversal of previously recorded inventory write-downs reflecting a slight recovery in commodity prices. Secondly, the redundancies largely associated with the simplification of the business will also be reflected. Thirdly, the impairments predominately in the Coal business are to be included. Additionally, the Group expects to record an exceptional item for global taxation matters between US$150 and US$200 million in the June 2016 half year, which also includes potential litigation and tax-related amounts.
 

Additional Items (Source: Company Reports)
 
Move in Carbon Capture Research Area: The group is fundingfor carbon capture research of Chinese steel sector. BHP is offering three-year $US7 million of funding to help break down the barriers to the use of carbon capture and storage technology in the Chinese steel industry. This would speed up both pilot scale and commercial scale Carbon Capture and Storage (CCS) projects. China accounts for about 47% of global steel production and use, making it a major market for BHP's iron ore and coking coal. The steel sector contributes almost 7% of global carbon dioxide emissions.
 
Stock Performance:The group is planning further steps to leverage its huge reserves base across the world. BHP has a first mover advantage in the Carribbean by developing a solid deep-water acreage position in Trinidad and Tobago, and Barbados. Accordingly, BHP is making evaluation with the high quality 3D seismic at Carribbean and planned three stages program. Meanwhile, BHP has a solid track record of even in the Gulf of Mexico and developed a solid acreage position when the oil prices were quite low. Here, BHP developed over 91 blocks in last nine months alone with no well obligations. Moreover, the Shenzi North exploration wells witnessed hydrocarbons while the group is assessing nearfield potential in its Southern Green Canyon production heartland. Accordingly, the group fastened further appraise in the basin and intends to do drilling in the Caicos by early FY17. BHP is also pursuing potential opportunities beyond Shenzi North which includes Paleogene and Cretaceous plays in the western Gulf of Mexico as well as evaluating deep-water for possible access in Mexico. On the other side, BHP expects to achieve FY 16 full year unit cost guidance at the major assets, with unit costs forecast to decline further next year, to maintain cost competitiveness in the industry. This move also indicates that BHP is well positioned to withstand the turmoil in the oil prices. BHP also announced for the appointment of Ken MacKenzie to the BHP Billiton Board as an independent Non-executive Director, effective as of 22 September 2016. As per the stock performance, BHP stock rose over 28.29% in the last six months (as of August 09, 2016) and the company is having decent dividend yield. We maintain our “Buy” recommendation on the stock at the current price of  $20.44
 

BHP Daily Chart (Source: Thomson Reuters)

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