No. 1 miner BHP Billiton plc has announced shedding $16 billion in non-core assests from a 2001 merger to enhance cash flow and boost returns by focusing on its “pillars” of iron ore, copper, coal and petroleum. The Perth-based, Australia-listed company will represent the industry’s biggest spinoff with operations in five countries across three continents with 24,000 employees and contractors.
The spinoff will consist of BHP’s aluminum and manganese assets, its Cerro Matoso nickel project in Colombia, its South African energy coal operations, some Australian met coal assets, and its Cannington silver, lead and zinc mine. A separate sale is under way for its Australia nickel business, Nickel West, added CEO Andrew Mackenzie; BHP’s current workforce totals 128,000.
Mackenzie said BHP’s main assets generated 96% of underlying profit in 2014 with potential integration of potash as a fifth pillar pending; other low-yield businesses, he added, may be up for sale. “A demerger is a logical step for other high-quality assets also in our portfolio that don't have a scale of those in our major business," he added, according to Reuters. "We are planning prudently, but will not be excessively conservative.”
The move was reported alongside 2014’s 8% increase profit announcement at $5.69 billion from higher volume and $2.9 billion in cost cuts; BHP forecasts $3.5 billion in further reductions through 2017. Today’s London and Australia-listed BHP was formed via a 2001 merger between London-based Billiton with Australia's BHP, co-joining the world's iron ore, aluminum, coal, copper, nickel and oil producers.
BHP officials said the new company, having generated more than $1.4 billion this year, will carry “minimal debt.” Analysts, meanwhile, have exressed optimism over the new entity; BHP Billiton CFO Graham Kerr will become CEO while BHP investor relations lead Brendan Harris will assume the CFO role.