Buy this storm-hit miner as a long-term investment

This profitable mining giant is likely to benefit from billions of dollars in construction projects in China. But currently high commodity prices have scared investors - which means this stock is trading at a bargain price, says Paul Hill.

Commodities appear poised for another sharp retreat. Last week, Tom Albanese, Rio Tinto's chief executive, said markets were weaker and that customers were asking to delay metals shipments. The International Monetary Fund echoed his view, downgrading its outlook on a basket of basic materials. But there's no need to man the life boats just yet. There's some decent money still to be made in mining.

Take the world's fourth-largest miner, Xstrata. Its share price has fallen 40% since April, even though prices for its coal (representing 27% of earnings before interest, tax, depreciation and amortisation EBITDA) have held up quite well. And despite the recent declines, Xstrata's other main outputs copper (44%), zinc (13%), nickel (13%) and alloys (3%) still sell for well above marginal production cost. The balance sheet has greatly improved too, with the dividend forecast to leap 36% this year on the back of solid cash generation.

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Paul gained a degree in electrical engineering and went on to qualify as a chartered management accountant. He has extensive corporate finance and investment experience and is a member of the Securities Institute.

Over the past 16 years Paul has held top-level financial management and M&A roles for blue-chip companies such as O2, GKN and Unilever. He is now director of his own capital investment and consultancy firm, PMH Capital Limited.

Paul is an expert at analysing companies in new, fast-growing markets, and is an extremely shrewd stock-picker.