Tuesday tips round-up: BHP Billiton, Rio Tinto, Glencore

14th Oct 2014 06:58

Anyone wishing to peer into the future might be advised to observe the goings-on in north-western Australia. They will find 3-km long robo-trains careening through the landscape. It is precisely these futuristic machines which have allowed BHP to drastically reduce the cost of bringing new supplies of iron ore to the market, to $30 per new tonne of the metal instead of $100. Critically, plans to add longer and heavier trains will further cut the firm's costs, as the company moves to invest in more infrastructure rather dig more holes in the earth. Rio is planning to do something similar.All of the above means Glencore will be left with less margin to carve out any synergies should it come back with another bid - this time with a premium. Tantalizingly, a merger between Rio and BHP would generate important savings as their transport networks run next to each other. Imagine that. It's unlikely, due to anti-trust concerns, but even so it may be worth pondering, says the FT's Lex column.Markets took the disappointing news on the clinical trial results of Smith&Nephew's (S&N) new compound to treat leg ulcers in their stride. This is not surprising as the orthopedics specialist's history in this space is uninspiring, even if the company declared itself baffled by the results. Despite failed forays into the R&D space such as the above S&N has managed to move out of low-growth areas, entering faster growing segments of the market such as wound care and sports medicine.Even so, much of the group's attraction for investors lies in the possibility that one day someone might launch a bid for it. US rival Stryker will be able to return with a bid at the end of November. Yet selling on 19 times' earnings - which is difficult to justify on the basis of fundamentals - the stock is only a 'hold' if you are prepared to bet on an eventual bid, The Times's Tempus believes.