the sp rocket., page-7

Guys/Ladies.
Personally I think Ozl is going and doing gang busters, its success of late is IMO not just one or two reasons its many.
and yes I'm going to add another. This write up doesn't mention OZL but "could" OZL's fab run yesterday have been due to this as well ? Some may feel I'm drawing a long bow here, but I really don't think so at all. As you know I have posted before about some of BHP Dumb, Dumb, decisions. We also better add they seems to can't get anything going to the list of late as well. Genius BHP - 3 failed efforts on the trot. Surely Kloppers is not the smartest guy in any room.

Read this all the way though all I believe its worth your time.

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BHP's breakthrough
By Tim Treadgold

November 5, 2010




PORTFOLIO POINT: A handy lift in market capitalisation after the rejection of its PotashCorp bid might see BHP Billiton returning capital or thinking small on takeovers.


It�s rare that failure results in a $3.6 billion profit - or generates a rash of fresh investment ideas that start with the company that failed: BHP Billiton.

That, however, is what happened when the Canadian government announced its intention to reject BHP Billiton's proposed takeover of Potash Corporation of Saskatchewan.

Within minutes of the PotashCorp bid being knocked back, or at least put on 30 days notice of a formal rejection, BHP Billiton's share price rose from $42.63 to $43.72, with peak sales at $44, the highest since April.

That rise of $1.09 a share (2.6%) on BHP Billiton's issued capital of 3.36 billion shares produces the $3.6 billion rise in market capitalisation. The rise is also comfortably ahead of yesterday's 0.5% lift in the All Ordinaries index and 1.5% in the materials index.

Interestingly, BHP Billiton was not the only stock to reveal a possible reaction to the PotashCorp announcement. Other companies, which could plug the gap left in BHP Billiton's corporate growth plans, were also moving higher yesterday. They included:

Origin Energy, a stock that has also been on BHP Billiton's deal-radar thanks to its leading position in the emerging coal-seam liquefied natural gas (LNG) business that is developing a head of steam in Queensland. BHP Billiton has been conspicuous by its absence in coal-seam LNG (along with Woodside) with both companies preferring to concentrate of conventional LNG projects. With PotashCorp rejected, and with spare cash, now might be a time for BHP Billiton to reconsider coal-seam LNG, a move that would give it a foot in LNG camps on either side of Australia. Yesterday Origin shares added 25c (1.6%) to $16.23, valuing the stock at $14.3 billion.
Alumina, which added 11c, or 5.4% as speculators took positions ahead of a possible revival of a plan hatched in 2007 for a joint BHP Billiton and Rio Tinto raid on Alumina's US parent and business partner in alumina and aluminium production, Alcoa. A BHP Billiton bid today would be much cheaper than in 2007, thanks to the decline of the US dollar and in Alcoa's share price, which at a last trade on the New York Stock Exchange of $US13.14 valued the company at $US13.42 billion, one-third the price proposed for PotashCorp.
Woodside Petroleum, which added 81�, or 1.8% on the ASX yesterday, is a frequently named target for BHP Billiton, but only if Woodside's 34% shareholder, Royal Dutch Shell, can be offered sufficient sweeteners to sell. A deal with Shell is possible because the Anglo/Dutch oil giant has been rejected twice as a full owner of Woodside on Australian national interest grounds. At its current price of $44.81, Woodside is capitalised at $35 billion.

There are problems with all three of the possible deals. Woodside has the obvious question of how to shake Shell free. With Alumina and/or Alcoa there is a potential problem of acquiring monopoly control of the alumina business in WA, the world�s biggest single source of the precursor mineral to aluminium production, a move certain to attract European and Chinese scrutiny of the sort that killed the proposed iron ore merger. Origin would be easier, if BHP Billiton has changed its mind on coal-seam LNG.

For the BHP Billiton board there is also the unpalatable potential that a move on any big target now would result in a fourth failure in less than three years, having already failed to acquire Rio Tinto, failed to merge its iron ore division with that of Rio Tinto, and now on the verge of failing to win Canadian approval for the PotashCorp deal. A three strikes scorecard.

That's why buying BHP Billiton itself, rather than any takeover target, might be the best approach in the belief that the board will reconsidering its think-big strategy, or be forced by institutional investors, to focus on shareholder returns, internal growth options (of which there are many) and smaller corporate deals that have more chance of success.

Canada, by saying the deal was unacceptable, but leaving open a 30-day window of appeal, might have done BHP Billiton shareholders a huge favour, as the initial $3.6 billion increase in market capitalisation illustrates.

Assuming the PotashCorp deal is a dead duck, the question becomes one of what next for BHP Billiton, and that's when myriad opportunities open up, including a possible final throw of the mega-deal dice with a move on Alcoa, Woodside or Origin.

But, a more likely development will be a switch away from debilitating deal failures to higher shareholder returns through increased dividend payments, a possible capital return, internal expansion and acquisitions that do not produce corporate indigestion of the sort inflicted by Rio Tinto and PotashCorp.

That leads to a list of possible BHP Billiton "think-small" targets that would complement its existing operations. High on that list (with three of them sharing a $2.8 billion valuation) are:

Riversdale Mining, an African-focused developer of a big coking coal deposit in Mozambique. This premium coal type, used to make steel, is in short supply worldwide. Yesterday, while other coal stocks did little, or fell, Riversdale shares added 64c, or 5.7%, to move to a 12-month high of $11.85. At its latest price Riversdale is valued at $2.8 billion, petty cash for BHP Billiton, but a stock with its foot on a critically important bulk commodity.
Iluka Resources, after several years in the doghouse, Iluka has been marching higher thanks to its worldwide reserves of zircon, a bulk mineral, of the sort favoured by BHP Billiton, and used extensively in ceramics and a range of high-tech industries. Iluka was a modest stockmarket performer yesterday, adding 10c or 1.5%, to $6.83, valuing the company at $2.8 billion and achieving the objective of putting BHP Billiton in the zircon and titanium business, which it tried to enter in the 1990s.
Aquarius Platinum, the leading Australian player in the platinum business, another area of failure for BHP Billiton in the 1990s, but one in which it might like to return given the metal's strategic importance. Aquarius added 6% yesterday (1%) to $6.09, making it the third possible small-beer target valued at $2.8 billion.
Equinox Minerals, the most successful Australian participant in the African copper industry thanks to its construction of the big Lumwana project in Zambia, centre of the once famous and steadily redeveloping copper belt of central Africa. Equinox is in the process of merging with Saudi-focused Citadel Resources, another reason for considering it a BHP Billiton target. Yesterday, Equinox shares added 1% to $5.90, valuing the stock at $4.2 billion.

There are other possible moves for BHP Billiton, including a return to gold, which it abandoned in the 1990s as a commodity over which it had no price control, something it does have with iron ore, coking coal, copper and possibly zircon.

Newcrest is the obvious gold target, but a return to gold would almost certainly be a step too far, and perhaps a step too late.

That's why the sequence of events at BHP Billiton almost certainly looks like this:

Higher dividends and a possible return of capital to shareholders as a first step and a form of apology from the board for three failures.
Bringing forward internal growth options, such as more copper from Escondida and new port and rail facilities to expand iron ore production in WA.
A development commitment on new LNG projects, including the long-dormant Scarborough project off the WA coast.

The dramatic effort to acquire PotashCorp has been a wake-up call for BHP Billiton, posing questions such as whether the company has become:

Too big for some sovereign governments to deal with.
Perhaps too big for its own good.
Almost certainly so big that it has lost its shareholder focus.

Whatever the correct answers to those questions, investors loved the Canadian government's tentative decision, and like even more the prospect of BHP Billiton changing its primary focus from growth to increased returns to shareholders, and "think-small" acquisitions that could create a raft of fresh takeover targets