Mining heavyweight BHP Billiton Limited (ASX: BHP) was on the market's chopping board again yesterday, at one stage losing another 1.6% of its market price following what has been a volatile three weeks for shareholders. The shares are down more than 10% over that time.
Like most other mining companies, BHP Billiton is struggling under the weight of falling commodity prices. Despite its low-cost operations and reasonable level of diversification, the miner's earnings still took a big hit in the 2015 financial year and could well do the same again in 2016.
Indeed, BHP's two most important commodities are iron ore and oil – both of which are hovering well below their historical highs. It also mines copper and coal, which are also under heavy pricing pressure.
Although some investors believe that these commodities may have finally found a floor, an investment in BHP Billiton today is still tempting fate. Chinese growth is expected to continue slowing in the coming years and that is expected to result in further falls for commodity prices, which will likely compress the miner's margins even further.
While it might offer a generous, fully franked dividend yield, I believe the headwinds facing BHP Billiton – and the majority of the resources sector – are simply too great to justify an investment today.
