The head of BHP Billiton’s planned spin-off company defended the timing of the demerger next year as commodity prices tumble to five-year lows.
Unveiling the name and logo as South32 Limited, Graham Kerr, the chief executive-elect, said yesterday shareholders had told him that the company would meet a need in the marketplace.
The transaction is poised to be the mining industry’s biggest ever spin-off. Perth-based South32 may be worth $16 billion (R181bn) at listing, according to Credit Suisse Group.
Named after the circle of latitude that passes through Western Australia and South Africa, the new company might in future seek to expand its range of operations, Kerr said.
“It’s not going to be constrained to the places that it currently operates,” he said.
The name was plucked from a list of 20 suggestions proposed by an employee, he said.
The world’s biggest mining firms are reshaping their portfolios as prices slump and after a decade-long $626bn acquisition spree brought write-downs to management exits.
Vale, the largest iron ore producer, says the potential sale of a stake in its base metals unit, valued at as much as $35bn, is already drawing attention from investors.
The new company’s operations will include Australia’s Cannington mine, the world’s largest silver and lead operation. It will also be the dominant global manganese ore player, the seventh-biggest alumina producer and ninth-largest nickel firm, according to Macquarie Group estimates.
“This will be a very strong, sizable company,” Kerr said.
Melbourne-based BHP would seek an additional share listing in London for the spin-off, after UK investors complained they might be barred from owning the new stock, it said in October.
The new firm will have its primary listing in Australia and a secondary listing in South Africa.
BHP Billiton is shedding the collection of smaller assets to prioritise its most lucrative iron ore, copper, coal and petroleum operations that stretch from Australia to the Americas, along with a potential potash unit in Canada. Shareholders would vote in May on approving BHP Billiton’s demerger.
Shares fell 0.08 percent to close at R260.09 yesterday. – Bloomberg