BHP Billiton planned to establish and split off a new metals and mining company, NewCo, in which its South African aluminium, coal and manganese assets would provide 30 percent of the income, the mining giant said yesterday.
It also announced a 10 percent rise in full-year profit to $13.4 billion (R141.9bn).
About 200 new jobs were expected at NewCo’s Johannesburg regional centre from where the company would manage its African operations, BHP Billiton chief executive Andrew Mackenzie said yesterday.
He said BHP Billiton was not leaving South Africa, in fact, he was confident about the country’s future and growth prospects. He believed the creation of NewCo would result in a more flexible company with improved productivity.
The $15bn company was expected to have a strong representation of South Africans on its board and management team when it started trading next year, Mackenzie said.
“We are not divesting from South Africa. This is a demerger. We will retain our South African shareholders, which make up 9 percent of our shareholder base. We are exploring for oil and gas in South Africa,” he noted.
BHP Billiton shares fell 5.45 percent to close at R347.56 on the JSE yesterday.
The demerger aims to simplify BHP Billiton’s portfolio and unlock value in both companies. NewCo will be headquartered in Perth, Australia and listed on the Australian Securities Exchange, with an inward listing on the JSE.
BHP Billiton had previously said it would create a leaner company by focusing exclusively on iron ore, copper, coal, petroleum and potash. It aims to achieve $3.5bn a year in productivity gains by the end of the 2017 financial year.
Stephen Meintjes at Imara SP Reid said shareholders were surprised at the substantial proportion of NewCo’s 30 percent income from South Africa and that it would not have a public limited company (Plc) listing like BHP Billiton.
“Although the assets are good, they do not have the scale and absolute tier 1 quality of the retained assets both in terms of the assets themselves as well as the jurisdiction,” Meintjes noted yesterday.
“The mandates of some of the Plc, and other, investors may not permit investment in companies with substantial developing economy content.”
NewCo will have assets in five countries with 24 000 employees, compared with BHP Billiton’s total of about 128 000.
Board approval for the demerger would be made once regulatory, government and third party approvals had been received, the company said.
BHP Billiton shareholders will be entitled to 100 percent of the shares of the new listed company through a pro-rata in specie distribution, in addition to retaining their existing shares in the group, which is listed in Sydney, Johannesburg, London and New York.
David Crawford will retire from BHP Billiton’s board in November to become NewCo’s chairman, while BHP Billiton chief financial officer Graham Kerr will become NewCo’s chief executive.
NewCo’s South African assets will include the manganese ore mine at Hotazel, Metalloys, a producer of high carbon and medium-carbon ferromanganese, as well as Energy Coal South Africa.
The Hillside aluminium smelter in Richards Bay and Mozal smelter in Mozambique will form part of the portfolio, along with the Cerro Matoso nickel operation in Colombia. The Australian assets will include Illawarra Coal, the Cannington silver mine, the Gemco manganese mine and the alumina refinery in Worsley.