BHP And Rio: Buy More Or Dump Them?

Anyone who has put a portfolio together in recent times would have to have some exposure to BHP-Billiton (BHP) and Rio Tinto ((RIO)) and would probably be pretty worried as iron ore prices head down, dragging their respective share prices. The question is, should we persevere with these iron ore majors or cut our losses if you have some and buy more reliable companies that only cop it when the overall market is crushed?

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Analysts Begin To Assume No BHP-Rio JV

For decades Australia’s two big diversified miners, BHP Billiton (BHP) and Rio Tinto ((RIO)), sold their high-grade Pilbara iron ore to steelmakers in Japan, Korea and Taiwan on annual contracts with little debate and little fanfare. But the arrival of China into the iron ore market was a game-changer. No longer was the iron ore market a pedestrian one. Suddenly iron ore was hot property.

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Welcome Back

When BHP Billiton (BHP) made its initial bid for Rio Tinto ((RIO)) about twelve months ago the two camps retained the advisory and potential underwriting services of every major broker in town. Under Australian Securities & Investment Commission rules, this precludes the stock analysts of each participating broker from providing any valuation or recommendation on the two. The intention is to avoid conflict of interest.

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