BHP Billiton to Shed Unwanted Assets

Posted by Joseph Keefe
Friday, August 15, 2014

Likely to include aluminium, manganese, nickel; will also include some coal, silver assets.

Diversified mining company BHP Billiton declared its preference for a demerger of its aluminium, manganese and nickel assets on Friday, setting the stage for the formation of a separate business that one report said could be worth $14 billion.

BHP said its board was considering a spin-off at meetings ahead of its annual results announcement next week. An Australian newspaper said those plans were well advanced and would include the Nickel West business that the world's biggest miner has been trying to sell.

"A demerger of a selection of assets is our preferred option," the company, which has a market capitalisation of $185 billion, said in a statement to the Australian stock exchange.

The company has long aimed to sell or spin off its manganese, aluminium and nickel assets, which contribute little to its earnings. Simplifying the company would "generate stronger growth in cash flow and a superior return on investment", BHP said on Friday.

"We are quite keen on companies with good capital discipline ... and I think the news announced this morning fits quite well within that investment frame," said Dimitri Willems, a senior portfolio manager at Kempen Capital Management which holds BHP stock.

"It could lead to more or better capital discipline going forward and more shareholder remuneration in future."

IRON ORE DRIVES BHP PROFITS

BHP is likely to offload between $1.0-2.5 billion of its debt to the new vehicle, according to analysts. Any more than that could be challenging to handle for a company that relies on assets with volatile returns.

BHP is relying on iron ore for the lion's share of fiscal 2014 earnings after beating its own guidance for full-year iron ore output, mining a record 225 million tonnes.

"Spin-offs have the potential to crystallise value that the market may not have been able to see," said Neil Boyd-Clark, a portfolio manager at Arnhem Investment Management, which owns shares in BHP.

He declined to put a value on the spin-off ahead of an announcement on what would be included in the new company.

The Australian Financial Review (AFR) newspaper said the separate company would comprise BHP's aluminium, manganese, nickel, Cannington silver mine and South African energy coal assets and would be worth $14 billion.

Analysts were divided over the precise value of those assets, with estimates ranging from $12 billion to $23 billion.

BHP was also debating whether to spin off its coal assets in New South Wales, the AFR said, without citing any source. The new company would be based in Perth and led by BHP's Chief Financial Officer Graham Kerr, it said.

It would have a primary listing on the Australian stock exchange and was likely to take a secondary listing in South Africa, the AFR added.

BHP declined to comment on the AFR report.

"Whether to list in Australia and South Africa will be a marketing decision. It's a question of matching the investor base," said a banker familiar with BHP's thinking. "Looking at the base metals space you don't have many listed names in Australia. And in South Africa, you can tap some money from pension funds who can only invest in rand."

In its statement to the market, BHP said it expected to consider a demerger when the board meets next week and would announce any material decisions immediately.

It is scheduled to announce full-year earnings on Aug. 19.

FOUR PILLARS


UBS analyst Glyn Lawcock said last month he expected BHP to go through a three-step process, selling its Nickel West business, then spinning off its manganese, aluminium and South African energy coal businesses as a separate company to all shareholders, before unwinding its dual-listing in London.

Most of the assets that analysts expect it to shed came into the company through London-listed Billiton when it merged with BHP in 2001.

At the time, those assets were touted for the diversity they brought, creating a mining giant with roughly equal earnings from aluminium, base metals, coal and iron ore.

But those former Billiton assets barely contribute to the company's performance now, overshadowed by a decade of soaring growth in its iron ore, copper, and coal businesses driven by China's rapid economic expansion over the past decade.

At the same time, BHP expanded in oil and gas through shale acquisitions in the United States.

CEO Andrew Mackenzie has championed iron ore, petroleum, copper and coal as the group's four key commodity "pillars".

"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," the company said in its statement on Friday.


By Sonali Paul and Silvia Antonioli

Maritime Reporter July 2015 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

Major Ivorian Cocoa Buyers Boycott Local Exporters Scheme

Major cocoa buyers are boycotting a scheme in Ivory Coast aimed at guaranteeing local firms a share of the lucrative export market, arguing that these players lack

DSM Dyneema Names President’s Successor

Gerard de Reuver has elected to step down as President of DSM Dyneema on August 1, 2015 after five years in the post, the company announced today. He will be succeeded by Golnar Motahari Pour,

Matson Pumps $30 Million into Alaska Operations

Ocean cargo shipper Matson, Inc. said it is moving quickly to fund improvements in its new Alaska operations following its May 29 acquisition of Horizon Lines' Alaska services.

Bulk Carrier Trends

Major Ivorian Cocoa Buyers Boycott Local Exporters Scheme

Major cocoa buyers are boycotting a scheme in Ivory Coast aimed at guaranteeing local firms a share of the lucrative export market, arguing that these players lack

Cargo Ship Refused Access to Paris MoU Region

General cargo ship M/V Georgiana H, IMO number 8911413, was detained in Marina di Carrara, Italy on July 17, tallying as the ship’s third detention in the Paris MoU region within the last 24 months.

G6 Alliance Modifies Asia-Europe

The G6 Alliance has strengthened its Asia-Europe service by adding additional ports.    The G6 alliance, consisting of APL, Hapag-Lloyd, Hyundai Merchant Marine, Mitsui O.

Finance

Major Ivorian Cocoa Buyers Boycott Local Exporters Scheme

Major cocoa buyers are boycotting a scheme in Ivory Coast aimed at guaranteeing local firms a share of the lucrative export market, arguing that these players lack

Matson Pumps $30 Million into Alaska Operations

Ocean cargo shipper Matson, Inc. said it is moving quickly to fund improvements in its new Alaska operations following its May 29 acquisition of Horizon Lines' Alaska services.

General Dynamics Tops Q2 Estimates

General Dynamics Corp, a maker of ships, tanks and business jets, reported higher-than-expected quarterly earnings and revenues on Wednesday, and sharply raised its outlook for full-year profit.

Energy

Mexico to Postpone Deep Water Auction

Mexico, which has started to open its nationalized oil industry to additional private investment, will postpone auctions for deep-water oil exploration and production

Oregon Bridge Danglers Hope to Delay Shell's Arctic Drilling

Protestors rappelled off a bridge in Portland, Oregon on Wednesday hoping to delay Royal Dutch Shell's Arctic oil exploration this summer by blocking the return

Côte D’Ivoire Invests in O&G Safety Training

Thegrowth in oil and gas activity in Côte D’Ivoire has seen investment in standardized safety training in the region far outstrip that of other hydrocarbon-rich West African countries,

News

Four Rescued from Boat Fire in California

U.S. Coast Guard and firefighter crews helped rescue four people from a boat fire Tuesday afternoon in Alameda, Calif.   Coast Guard Sector San Francisco Command

Major Ivorian Cocoa Buyers Boycott Local Exporters Scheme

Major cocoa buyers are boycotting a scheme in Ivory Coast aimed at guaranteeing local firms a share of the lucrative export market, arguing that these players lack

Nautilus Awards Contract for Dewatering Plant Design

Nautilus Minerals Inc. has awarded a contract for the design of the Solwara 1 dewatering plant to be used on the company’s production support vessel to the Brisbane

 
 
Maritime Careers / Shipboard Positions Maritime Security Maritime Standards Offshore Oil Pipelines Pod Propulsion Port Authority Ship Electronics Ship Simulators Shipbuilding / Vessel Construction
rss | archive | history | articles | privacy | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1711 sec (6 req/sec)