BHP, Rio Profit Forecast Raised on Metals Outlook, UBS Says

(Bloomberg) -- BHP Billiton Ltd. and Rio Tinto Group, the world’s largest and third-largest mining companies, had their profit estimates raised by UBS AG by as much as 31 percent after the bank lifted its metal price forecasts. BHP’s net income may reach $12 billion in the year ending June 30, 2010, up 31.4 percent on an earlier forecast, UBS analysts led by Glyn Lawcock wrote in a note dated yesterday. Rio’s profit may be $13.7 billion in 2010, up 20.5 percent on an earlier forecast, he said.

UBS raised its 2010 forecasts for nickel by 40 percent, copper by 32 percent, aluminum by 19 percent and zinc by 13 percent because of tight supply and improving demand. Contract prices for iron ore, BHP’s biggest earner and Rio’s second biggest, may rise 20 percent next year, UBS said, reversing a previous estimate for a 33 percent decline. “BHP Billiton is well-leveraged to iron ore, coking coal and copper -- our top three commodity picks -- because of volume growth and price floor underpinned by Chinese demand and supply options,” Lawcock wrote.

He raised his rating on BHP to “buy” from “neutral,” and increased the share-price estimate by 12 percent to A$42.50. Rio, rated a “buy” by UBS, is the bank’s preferred diversified mining company because it has greater exposure to a recovery and it is trading at a discount to BHP, Lawcock wrote.