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Tickers in this Article: BHP, RIO, VALE, CLF, TCK
Australian-based diversified mining company BHP Billiton (NYSE:BHP) reported a massive annual profit on the strength of high revenues from iron ore and copper. The company's annual results were again driven by the growth in demand from the Chinese market. BHP also gave a positive outlook on the ongoing commodity supercycle.

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BHP Full Year Results
BHP Billiton reported full year profits of $23.6 billion, which was an increase of 85.9% from the $12.7 billion it earned a year ago. Revenue rose to $71.7 billion, a 35.9% increase in the same period. Operating cash flow margin was 47%. The company derived 50% of its operating profits, or $16 billion of the $32 billion, from the iron ore and metallurgical coal markets in China. For the near term, the company expects this robust demand to continue, with supply side constraints and demand growth in the China, India and Brazil markets.

Mining and Metal Boom
BHP Billiton, Rio Tinto plc (NYSE:RIO), and Vale (NYSE:VALE) are regarded as the big three in iron ore mining, and are all diversified mining giants. UK based Rio recently posted a 30% net earnings increase for the first half of this year, with net earnings of $7.6 billion compared to $5.8 billion in the same period of 2010. The company reported gross sales of $31.8 billion, compared to $26.2 billion in the first half of last year. Strong Asian demand as well as higher prices for metals and minerals fueled this, the same story as for BHP.

Iron ore and pellet producer Vale's second quarter results, which preceded both Rio's and BHP's reports, were much like BHP's, with a 70% earnings increase. Gross revenue was $15.3 billion, a 54.5% year-over-year increase. Sales volume of 62.6 million metric tons of iron ore shipments made up 59.3% of the total revenue. Again, Vale's geographic distribution, with 52.1% of its revenue generated from Asia, was much like BHP's and Rio's.

It wasn't just the mega players such as the big three unearthing outsized profits. Smaller iron ore miner Cliffs Natural Resources' (NYSE:CLF) net income and revenue for its second quarter both jumped by over 50% compared to its year ago results. Even miners which have been experiencing problems with certain mines, such as Teck Resources (NYSE:TCK), are pulling ahead with improved performances. The fortunes of the miners of iron ore, copper and other metals, as well as the energy producing coal, have been lifted significantly by the oft-cited tighter supplies and increasing demand.

BHP Says Supercycle Intact
While BHP expects near-term demand to stay strong, the company did point out that even the high demand for iron ore and met coal for China's steel industry "will revert to more sustainable levels," meaning demand will eventually moderate. Also, there are near term cost pressures that the company admits will be felt. BHP cited the time lag effect of commodity costs, as tight supplies and labor costs can surface in the near term. The company expects this to be outweighed by the economic growth of the emerging economies, which should endure in the medium and longer term.

The Bottom Line
The stock recently traded around the middle of its 52-week range, with a forward P/E of just over nine. For prospective investors, it's really a question of how much you see demand sustaining itself especially from the emerging markets (mostly China) against the cost pressures and the potential further slowing of the global economy. Regardless of how this near and medium term pan out, however, BHP has a bright future, as demand for its commodities are still likely to be brisk. (For additional reading, take a look at Investing In The Metals Market.)

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