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BHP thrown a lifeline

Struggling BHP Billiton (ASX: BHP) shareholders have been thrown a lifeline.

Recently, BHP, among others like Atlas Iron (ASX: AGO), Fortescue Metals Group (ASX: FMG) and Rio Tinto (ASX: RIO), have realised losses in their share price as investors shift their focus from mining stocks to service industries. Share prices reflect future expectations and at the moment, investors mustn’t expect much from Australian resource stocks.

However, BHP shareholders have been given 10 billion more reasons to be confident that they will weather the storm that so many investors expect will hit them hard. A move into the global bulk fertilisers market through the development of its Jansen potash project in Canada has received a seal of approval from Goldman Sachs (NYSE: GS). The commodity is expected to boom in the coming decade as the two most populated countries in the world – China and India – will look to achieve greater yields from nutrient deficient soils.

Investors are also hoping that BHP and other miners take note of Woodside Petroleum’s (ASX: WPL) recent move to pay higher dividends from profit as they looked to impress investors during tough economic times. This move is likely to be mimicked by cashed up resource companies.

Many industry experts agree that bigger resource companies will be able to produce good quality commodities at cheaper prices than smaller rivals and service-related companies. This puts Rio and BHP in a different light for many investors who see the companies as having a strong operating future ahead of them.

Foolish takeaway

As growth expectations from China have weighed in on the mining giant, investors shouldn’t expect BHP to go much lower as the company already trades at a premium. With the possibility of more diversification through its fertiliser division and a likelihood of increasing its dividend to impress investors, particularly after it sold many key assets, BHP could start giving back to investors.

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More reading

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Owen Raszkiewicz owns shares in Rio Tinto. 

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