BHP Billiton expected to announce plans soon to spin off its non-core assets, including its aluminium, manganese and coal operations in South Africa, as part of a strategy to simplify its portfolio, the diversified global mining house said on Friday.
The board would consider the company’s structure at a meeting this week and announce its decision immediately, if there was material change, it said in a statement.
The London-listed company had been studying alternatives to its present structure, and the board had selected a demerger of assets as a preferred option for a leaner portfolio.
Kieron Hodgson, a commodities and mining analyst at Charles Stanley Securities, said the news came as no surprise since BHP Billiton had previously alluded to the divestiture on many occasions, although many people had thought it would be in the form of a trade sale.
“We would expect a number around $10 billion (R106bn) to be the value of the assets, market capitalisation will depend on underlying trends as nickel, particularly, is very hot right now,” he said.
“Certainly, we think there is an appetite for the assets. There are not enough quality mid-tier producers for investors so we believe investors will be very interested, although it will depend on what assets are included at the end of the day.”
BHP Billiton said it believed a portfolio focused on iron ore, copper, coal and petroleum assets as its four pillars would help it retain the benefits of diversification, generate stronger cash flow and deliver a superior return on investment.
“By increasing our focus on these four pillars, with potash as a potential fifth, we will be able to more quickly improve the productivity and performance of our largest businesses,” it said in the statement.
In the past two years the group has completed $6.7bn worth of deals in which it disinvested in Australia, the US, Canada, South Africa and the UK. It exited from petroleum, copper, iron ore, coal, mineral sands, uranium and diamond assets during the period.
It had previously said the next phase of simplification included structural options, but it would only pursue options that maximised value for its shareholders.
The disinvestment would not necessarily mean BHP Billiton would exit South Africa, an analyst who spoke on condition of anonymity speculated.
“The assets will still be there, but a newly listed company on the JSE will be formed so shareholders can decide whether to keep the shares or not.”
The disinvestment would be similar to the decision for Gold Fields to spin off its ageing South African assets to form Sibanye Gold last year.
Meanwhile, former bankers and mining executives have set up companies and funds to bid for assets put up for sale by big mining houses.
BHP Billiton shares advanced 2.85 percent to close at R365.10 on Friday.