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Is There Big Value in Miners Rio Tinto, BHP Billiton, and Anglo American?

By David O’Hara – Apr 25, 2013 at 2:31PM

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Concerns about the strength of the global economy have cut share prices among the FTSE 100's mining companies.

LONDON: Rio Tinto (RIO -0.49%) (RIO -0.39%) is primarily an iron ore producer. The bulk of Rio's operations are in Australia and North America, but the company does have a global footprint.

Concerns over economic growth in China. and likely future demand for iron ore, has seen the shares lose 14.5% so far in 2013.

This has led the analyst community to reduce its profit expectations. This time last year, consensus estimates were for earnings per share (EPS) of $8.45 in 2013. Today, the broker community is forecasting just $5.75 of profit per share.

The recent falls put the shares on a 2013 price-to-earnings (P/E) ratio of eight, with an expected dividend yield of 3.9%. The dividend is well covered. Any further falls could be a great opportunity to add a blue-chip miner to your portfolio.

BHP Billiton
With operations targeting steel production (iron ore, coking coal and manganese) along with a considerable energy portfolio, BHP Billiton (BHP) (BHP -0.39%) is the most diverse of the three companies. BHP also has most of its operations in Australia, the U.S. and Chile. As such, it is less exposed to political risk than Anglo American (AAL -1.28%).

However, this has not prevented the shares falling almost 15% so far in 2013.

Like Rio, profit expectations have declined sharply in the last 12 months. This time last year, City analysts had pencilled in $4.00 of earnings per share for 2013. Today, that figure has come down to an expected $2.55.

A 4.3% yield is forecast for 2013, rising to 4.6% next year. Cheap enough to warrant a closer look.

Anglo American
In the last 12 months, Anglo American shares are down more than 30%.

Anglo has more exposure to precious metals than Rio and BHP. This delivered real problems for the firm in 2012, when a strike at a platinum mine in South Africa caused production to halt. Just as those difficulties will have frightened some investors, the outlook turned worse in 2013, as precious metal prices have fallen.

The market now expects that Anglo American will deliver $2.31 of earnings per share in 2013. One year ago, $5.35 was being forecast.

Anglo American shares are today priced at 10.8 times expected profits for 2013. The forecast dividend means that the shares today yield an expected 3.4%.

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David O'Hara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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