BHP Billiton Limited (ADR) (BHP), Rio Tinto plc (ADR) (RIO): This Miner’s Margins Might Soar

BHP Billiton Limited (ADR) (NYSE:BHP) and Rio Tinto plc (ADR) (NYSE:RIO) are also huge iron ore plays, but they have more diversified portfolios. While BHP has large oil projects (for example Eagle Ford), Rio Tinto plc (ADR) (NYSE:RIO) is a strong copper player. Moreover, BHP Billiton Limited (ADR) (NYSE:BHP) and Rio Tinto have their net debt set at 1 time EBITDA while Anglo American has a net debt to EBITDA multiple of 1.7 times.

Foolish conclusion

All of the above being said, the scope for margin improvement at Anglo American is too high to be ignored. The company’s CEO is aware of his company’s weaknesses and is working hard to overcome them. Anglo American is working into diversifying its portfolio, cutting overhead, reviewing its project pipeline and reorganizing itself very fast. The company has already cut its senior management team and consolidated its ten business units into six groups. In Cutifani’s own words “We do not require wholesale change to our portfolio, but we do need to become much more disciplined, more effective and more efficient.” I believe the plan is realistic so I will start following Anglo American closely. I think you should do the same!

Federico Zaldua has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Federico is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article This Miner’s Margins Might Soar originally appeared on Fool.com is written by Federico Zaldua.

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