BHP to create new global metals and mining company

Tuesday 19 August 2014 12.03
BHP Billiton announces plans to create a new independent company
BHP Billiton announces plans to create a new independent company

Global mining giant BHP Billiton is to create a new independent company by spinning off some of its aluminium, coal, manganese, nickel and silver assets. 

The world's biggest miner said this would allow it to focus exclusively on its core long-life operations - iron ore, copper, petroleum, coal and potash - while reducing costs and improving productivity. 

The new entity will be listed in Australia with a secondary listing on the Johannesburg Stock Exchange with the demerger expected to be completed in the first half of the 2015 calendar year. 

"For over a century, BHP Billiton has progressively reshaped its business to maintain its industry leadership," said BHP chairman Jac Nasser. 

"We believe the proposed demerger, if implemented, will accelerate the simplification of the group's portfolio, provide investors with choice and unlock value in both companies. Our shareholders will have the opportunity to vote on this proposal once the necessary approvals are in place," he added. 

The company said the new entity, to be named NewCo, would have assets in five countries. It will be chaired by the long-serving David Crawford, a current BHP board member. 

BHP first signalled in April it may sell some assets but did not say how this would be achieved with reports at the time saying the new company could be worth about $20 billion. 

"The assets that would form the new company are not of the same size as those in our major basins but many are among the largest and highest quality in their sectors," said BHP chief executive Andrew Mackenzie. 

"We believe they will be more valuable in a purpose built, independent company than they would be in BHP Billiton," he added.

Meanwhile, the company posted a 23.2% jump in annual net profit to $13.83 billion, as spending cuts and productivity gains offset weaker commodity prices.

"With robust volume growth and further productivity gains expected, we remain confident in the outlook for the group," BHP's CEO Andrew Mackenzie said.

The annual result is the first time BHP has posted a year-on-year increase in net profit since 2011, when it reported a record profit of $23.65 billion. This year's profit is slightly higher than the $13.6 billion forecast by analysts. 

The productivity boost saw underlying profit rise by 10% to $13.4 billion as the miner booked $2.9 billion in cost savings. 

BHP's balance sheet strengthened during the period, with net debt falling by $1.7 billion to $25.8 billion. The miner declared a final dividend of $1.21, a 4% year-on-year increase. 

Mackenzie said the results showed the world's biggest miner had "delivered on its commitments".

"Our operational performance continued to improve, enabling us to exceed production guidance for a number of our core commodities including iron ore, metallurgical coal and petroleum liquids," he added.

BHP said a balanced global economic outlook would provide support for its commodities, although "with more moderate rates of demand growth".

"In the longer term, wealth creation and urbanisation will remain the primary drivers of commodities demand, although the transition to consumption-led growth in emerging economies should provide particular support for industrial metals, energy and fertilisers," it added.