BHP Billiton (BHP) Clears Wreckage, Restarts Iron Ore Trains

BHP Billiton Limited BHP has cleared all wreckage caused by the deliberate derailment of the runaway iron ore train last week. The company has now resumed rail operations between its Pilbara iron ore mines and Port Hedland.

 

On Nov 5, the company’s fully laden iron ore train consisting of four locomotives and 268 wagons hurtled driverless through the Pilbara desert. The situation was a result of failed safety mechanisms as the train started to move while the driver was off it. The unmanned train continued at a speed 110km/h for around 92 km for over 50 minutes before BHP Billiton's remote operations center in Perth deliberately derailed the train around 120 km south of Port Hedland.

 

It was a necessary step in order to avoid a catastrophe. The derailment left a wreckage of crumpled ore wagons, overturned locomotives and spilt iron ore. It also damaged around 5 km of train tracks, severing the crucial transport link between its mines and the port. Notably, the derailment is being touted as one of the biggest train crashes by scale in history of Western Australia.

 

A probe is currently underway to determine how the train was able to travel unmanned. The impact on BHP Billiton’s production is still unclear. However, per reports, shipping rates have slowed but not ceased since the derailment. However, it has been feared the mining giant might have to downgrade full-year guidance following its announcement last week that its ore stockpiles at port would run out before it could restart rail movements. Nevertheless, the mining giant has insisted that it will meet all contractual commitments to customers.

 

 

Over the past year, BHP Billiton’s shares gained 10%, against the industry’s decline of 2%. BHP Billiton’s cash flow remains robust, driven by strong operational performance and higher prices. BHP Billiton is improving operations on the back of smarter technology adoption across the entire value chain.  The company has lowered net debt considerably. Its investment plans are also on track across iron ore, copper, coal and petroleum. Recently, BHP Billiton entered an agreement to acquire 6.1% interest in SolGold, with which it will gain shares of the Cascabel copper-gold project in Ecuador.

 

BHP Billiton currently carries a Zacks Rank #3 (Hold).

 

Some better-ranked stocks in the basic materials space are CF Industries Holdings, Inc. CF, KMG Chemicals, Inc. KMG and The Mosaic Company MOS.

 

CF Industries has an expected long-term earnings growth rate of 6% and a Zacks Rank #1 (Strong Buy). The company’s shares have gained 40% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

 

KMG Chemicals has an expected long-term earnings growth rate of 28.5% and a Zacks Rank #2 (Buy). Its shares have risen 40% in the past year.

 

Mosaic has an expected long-term earnings growth rate of 7% and a Zacks Rank #2. The company’s shares have rallied 57% over a year’s time.

 

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