Shares in Australia's favourite miner BHP Billiton Limited (ASX: BHP) have risen 2.5% this week, outpacing the broader S&P/ASX 200 Index's (Index: ^AXJO) (ASX: XJO) rise of just 0.4%. Since the beginning of 2014, the stock is still behind having returned just 0.7%, compared to the ASX 200's 2.5% jump.
The "Big Australian" rose strongly this week based on a number of reasons. Here are the three most likely causes:
1. The price of steelmaking ingredient iron ore steadied, trading at US$103.50 a tonne overnight. Given that the commodity was trading at an average of around US$135 a tonne throughout 2013, investors have been concerned about how heavily BHP Billiton's earnings could be affected by the huge drop in price – particularly with analysts forecasting it to fall even further in price. Of course, BHP Billiton won't be as affected as other companies with greater exposure to the commodity, such as Rio Tinto Limited (ASX: RIO), Fortescue Metals Group Limited (ASX: FMG) or Mount Gibson Iron Limited (ASX: MGX).
2. The resilience of nickel also played its part in boosting investor sentiment. Nickel experienced its largest one-day price jump in nearly two years earlier in the week, taking its rise since the beginning of the year to around 50%, thanks to Indonesia's ban on the export of raw materials. While BHP Billiton does not consider nickel to be one of its core focuses, the metal's stronger price will help attract more compelling bids for its nickel assets such as Nickel West.
3. Speaking of Nickel West, a successful sale of the division would free up an enormous amount of cash, which could be used to reduce its debt levels. The company has indicated that once its net debt falls below US$25 billion, it will increase its focus on capital management initiatives which will mean greater returns for shareholders.
A much better bet than BHP Billiton
Given its high level of diversification and lower cost-base than other miners, BHP represents the safest mining investment for your hard-earned money. However, I also believe there are currently far more compelling opportunities to take advantage of.
