The very simple case for establishing a position in AE Portfolio Aggressive Holding BHP Billiton Ltd (ASX: BHP, NYSE: BHP) is that it’s trading below our buy-under target of USD40, which applies if you have the ability to trade its Australian Securities Exchange-listed common share.

The New York Stock Exchange (NYSE) listing for BHP is an American Depositary Receipt (ADR) that represents two ordinary, ASX-listed shares. The buy-under target for BHP’s NYSE listing is USD80.

The reasoned argument for buying and holding BHP Billiton for the long term is that, despite a difficult year for the largest mining company in the world by market capitalization, it remains best-in-class due to its size, well-diversified and competitive operations and a still-solid financial profile.

Of course there are significant challenges at present and on the horizon, chief among them commodity-price volatility.

BHP’s core business is built on the four pillars of iron ore, coal, copper and petroleum, all of which are exposed to cyclical economic conditions. Ebbs and flows in the macro environment directly impact earnings and cash flow, as is abundantly clear in BHP’s fiscal 2013 first-half numbers.

Of particular concern is evolution of China’s economy from an investment- to a consumption-led growth model and the impact this and changes in other developing countries will have on resource consumption.

Resource competitors have built many new mines and expanded existing projects to meet what apparently was expected by some to be a never-ending commodity super cycle, driven by emerging-market appetites, resulting in excess production capacity in many of BHP’s key products.

At the same time, a choppy albeit improving recovery in the US as well as continuing concerns about European financial stability contribute to concerns for commodity-price volatility.

The mining boom that began in the early 2000s also led to inflationary cost pressures for both capital and operating costs of commodity producers. With the general decline of commodity prices since mid-2011, operating margins have been reduced. The industry downturn has eased some of these pressures, but costs remain a significant issue for producers.

A return to more normal rates of growth in the US, easing of Europe’s many dilemmas and a soft landing for China–all of which would qualify as good news–could present a variation of this challenge, as cost growth reaccelerates as demand and production tick higher.

Many of BHP’s commodities are denominated in US dollars but produced in non-US dollar countries, so margins are sensitive to currency movements. A strengthening buck of late has actually helped, though there remains the threat of US budget, deficit and debt-limit politics inflicting damage on the world’s reserve currency.

BHP operates in many developing countries, and new mining projects are often located in politically unstable regions. As such the company is exposed to terrorism, civil unrest, nationalization, renegotiation or nullification of existing contracts, leases, permits or other agreements and changes in laws and policies.

Many jurisdictions, including Australia with its Minerals Resource Rent Tax, are also seeking to extract higher taxes and royalties in the wake of the mining industry’s recent period of high profitability.

And many jurisdictions are pursuing legislation and regulations to limit the potential impact of mining and oil and gas development on public health and safety. But this is nothing really new.

But into this miasma BHP Billiton brings abundant strengths.

It owns and operates a large number of competitive resource operations, its projects among the lowest-cost producers of iron ore, coal, copper and oil and gas as well as manganese and lead.

BHP benefits from large, long-lived reserve bases, with in-place production, processing and delivery assets capable of moving output to international markets on a very competitive basis. The company continues to report strong EBITDA margins in several operating units.

One of the most diversified resource companies by product and geography, BHP has thus mitigated country-specific, operational and production risks and stabilized its earnings profile.

Management has narrowed its investment and acquisition focus, particularly following the May 2013 replacement of CEO Marius Kloppers by Andrew Mackenzie, concentrating recent large-scale deal-making in the iron ore and petroleum spaces. It’s also aggressively disposing of non-core, underperforming assets.

Among the key benefits of BHP’s size and scale is its ability to develop and deploy advanced technology cheaply and efficiently. Implementation of “best practices” across its operating platform helps it realize savings that smaller, less diversified producers simply can’t match.

BHP’s technical skill, along with the financial capacity to back implementation, allow it to develop large-scale operations and offset risks working, for example, in politically unstable areas.

BHP Billiton’s financial metrics have weakened with higher debt levels and lower net earnings and operating cash flow brought on by reduced commodity prices.

But the aggressive expansion program put in place by Mr. Kloppers has been rolled back by Mr. Mackenzie. And the company is well-placed to grow market share and remain profitable as smaller competitors succumb to the pressures of lower prices for iron ore, coal, copper and other outputs.

Fiscal 2013 fourth-quarter and full-year production results underscore BHP’s ability to adapt and thrive in a rapidly changing environment.

Management reported a significant increase in both production and sales for iron ore. Output of the key steel-making ingredient was up 19 percent quarter over quarter.

With the expansion of the Jimblebar project on track for completion a quarter ahead of schedule, management issued fiscal 2014 iron ore production guidance of 207 million metric tons.

Copper output up 8 percent sequentially, with the Escondida, Antamina and Pampa Norte projects all meeting forecasts. Metallurgical coal and thermal coal output were up 21 percent and 26 percent, respectively, on a sequential basis.

The one negative was petroleum output, where the 236 million barrels of oil equivalent missed guidance of 240 million despite BHP spending USD4.8 billion versus a forecast of USD4 billion on its US onshore oil and gas operations.

Management noted a reduction in fiscal 2014 spending, with activity increasingly focused on the liquids-rich Eagle Ford Shale resource, though it didn’t provide a production forecast for the current year.

BHP did provide strong fiscal 2014 guidance for iron ore and copper, with first production from the Jimblebar iron ore mine expansion now expected in the fourth quarter of calendar 2013 versus a prior expectation of the first quarter of calendar 2014.

Management expects Escondida to maintain its “strong performance¨ in fiscal 2014 before hitting approximately 1.3 million metric tons of copper output in fiscal 2015.

The new regime’s commitment to a more conservative project development plan is already being tested.

Mr. Macenzie has said potash may become the “fifth pillar” of BHP’s resource business, joining iron ore, coal, copper and petroleum,  the foundation for the fertilizer input to be set with the development of the Jansen project in Saskatchewan, a potential 3 billion metric ton resource that could cost as much as USD16 billion to bring online.

Mr. Mackenzie has said BHP is taking a “tens of years” view on Jansen and potash. We expect to hear much more about the company’s plans for the project when management presents fiscal 2013 results on Aug. 20.

BHP has recognized the uncertainties and volatility of near- to medium-term commodity markets, making management changes and curtailing its expenditure plans through the approval of fewer new capital projects.

And its ongoing divestment program should help it fund remaining capital expenditure needs or even allocate resources to the development of that “fifth pillar,” potash.

Uncertainty in commodity markets remains high. But BHP has demonstrated its willingness and ability to control costs as it preserves its financial strength in a volatile environment.

If you have a long-term horizon, now is a good time to establish a position.

BHP Billiton is a buy up to USD40 on the Australian Securities Exchange.

As we note above, BHP’s NYSE listing is an ADR that represents two ordinary shares traded on the ASX. Buy BHP on the NYSE up to USD80.

BHP Billiton’s fiscal year runs from July 1 to June 30. The company reports full financial and operating results twice a year; it typically posts first-half results–for the six months ending Dec. 30–in late February, with full fiscal-year numbers out in late August.

Interim dividends are usually declared in September and confirmed with first-half results. Final dividends are also declared ahead of the reporting of full fiscal year results.

Management declared an interim dividend for fiscal 2013 of USD0.57 on Sept. 18, 2012. It was paid to shareholders of record as of March 8, 2013, on March 18, 2013.

For fiscal 2012 BHP declared its final dividend of AUD0.55 on Jul. 21, 2011, with shares trading “ex-dividend” as of Sept. 5, 2011, a record date of Sept. 9 and a payable date of Sept. 29.

Management will declare the final dividend for fiscal 2013 when it announces full-year operating and financial results on Aug. 20, 2013. The record date for the final dividend is Sept. 6, 2013, with a payment date of Sept. 25, 2013.

ASX-listed shares will trade ex-dividend on the final declaration as of Sept. 2, 2013. NYSE-listed shares will trade ex-dividend on the final declaration as of Sept. 4, 2013.

BHP’s dividend policy was the subject of much debate following Mr. Mackenzie’s ascension, but the new CEO reiterated that the company’s existing “progressive” dividend policy has not only worked well historically but will continue to do so. Historically, BHP has returned around 50 percent of underlying earnings through dividends and share buybacks.

Dividends paid by BHP are “qualified” for US tax purposes. Based on the “fiscal cliff” compromise reached in Washington, DC, in early January 2013 dividends will be taxed at Bush-era rates of 5 percent to 15 percent for investors’ first USD450,000 a year of income for couples and USD400,000 for single filers. Above that the maximum tax rate is 20 percent.

The Australian government withholds 5 percent to 15 percent, based on the US-Australia tax treaty on double taxation. The two countries have not taken the step of eliminating withholding from dividends paid in respect of shares held in a US IRA, as have the US and Canada.