BHP Billiton Spinoff Will Create a New Global Mining Company
BHP Billiton on August 19 announced
plans to spin off a selection of its aluminum, coal, manganese, nickel, and silver assets to create an independent global
metals and mining company (NewCo).
When the spinoff is complete, BHP Billiton
will become almost exclusively focused on
its large, long-life iron ore, copper, coal,
petroleum and potash assets.
Not included in the spinoff are BHP
Billiton’s Nickel West operations in
Western Australia, its New Mexico Coal
business in the United States, and some of
its smaller petroleum assets, all of which
remain under review.
Subject to final board, shareholder and
third-party approvals, BHP Billiton expects
the creation of NewCo to be completed in
the first half of the 2015.
NewCo’s assets will include:
• BHP Billiton’s aluminum business, including the large, low-cost Worsley
alumina refinery in Western Australia;
the Hillside, South Africa, and Mozal,
Mozambique, aluminum smelters; and
interests in bauxite, alumina, and aluminum assets in Brazil that are not
operated by the company.
• Illawarra Coal, New South Wales,
Australia, which is a significant exporter
of metallurgical coal into the Pacific
Basin; and Energy Coal South Africa,
which is South Africa’s third largest exporter of thermal coal.
• BHP Billiton’s manganese business,
which is the world’s largest producer of
manganese ore from its GEMCO mine,
Northern Territory, Australia, and Hotazel
mine, South Africa, and a top global producer of alloy through its TEMCO, Tasmania, Australia, and Metalloys, South
Africa assets.
• The Cerro Matoso laterite nickel mine
and ferro-nickel smelter in Colombia.
• The Cannington silver-lead-zinc mine in
Queensland, Australia, which is the
world’s largest silver mine.
The BHP Billiton announcement stated:
“This portfolio is cash flow positive today
with assets competitively positioned in the
first or second quartile of their industry cost
curves. In the 2014 financial year, its
underlying EBITDA margin was 21%, and
over the last decade it generated robust
earnings through the cycle, with an average
underlying EBITDA margin of 34%.”
NewCo’s head office will be in Perth,
Australia, while its African operations and
its global shared services center will be
managed from a regional head office in
Johannesburg, South Africa.
Its chairman will be David Crawford,
who will retire from the BHP Billiton board
in November. BHP Billiton’s current CFO,
Graham Kerr, will become NewCo’s CEO,
and its head of investor relations, Brendan
Harris, will become NewCo’s CFO.
After the spinoff, BHP Billiton’s minerals
portfolio will be focused on six major assets
that are operated by the company: Western
Australia Iron Ore, Queensland Coal, New
South Wales Energy Coal, and Olympic Dam
copper in Australia; and the Escondida and
Pampa Norte copper mines in Chile. The
company is currently investing in a seventh
asset, its Jansen potash project in Saskatchewan, Canada. The company also will
retain non-operated joint-venture interests in
Antamina copper, Peru; Cerrejón energy coal,
Colombia; and Samarco iron ore, Brazil.
BHP Billiton’s petroleum business will
focus on its high-quality assets in the
United States and Australia.
The spinoff will not alter BHP Billiton’s
position as the largest exporter of metallurgical coal, a top three producer of iron ore,
a top four exporter of copper concentrate,
the largest overseas investor in United
States shale, and developer of a major
potash resource in Saskatchewan.
BHP Billiton CEO Andrew Mackenzie
said, “By concentrating on what we do best, the development and operation of
major basins, we can improve our productivity further, faster, and with greater certainty. With a simpler portfolio, we are targeting sustainable, productivity-led gains
of at least $3.5 billion per annum by the
end of our 2017 financial year.”
As featured in Womp 2014 Vol 09 - www.womp-int.com