BHP spinoff company to include SA aluminum and manganese units

David Stringer, Jesse Riseborough

Resources giant BHP Billiton plans a demerger in order to streamline and simplify its operations and South African assets are on the chopping block.

Miners are trimming portfolios as commodity prices retreat and after poorly timed acquisitions. (Reuters)

BHP Billiton, the world’s biggest mining company, plans a spinoff of a company which will include assets from aluminum smelters to South African energy as it simplifies its operations.

The new company will be based in Perth with Graham Kerr, BHP’s chief financial officer since 2011, as its chief executive, the Melbourne-based producer said on Tuesday in a statement when announcing a 10% jump in underlying profit.

“In a single step, we will significantly increase BHP Billiton’s focus on the exceptionally large resource basins that underpin its competitive advantage,” chief executive Andrew Mackenzie said in the statement.

Focusing on iron ore, copper, coal and petroleum units that generated about 85% of its sales last year, will raise free cash flow, help boost production growth and deliver stronger return on investment, Mackenzie said in May.

Miners are trimming portfolios as commodity prices retreat and after poorly timed acquisitions in a decade-long $616-billion investment spree led to asset writedowns and management clear-outs. The restructuring would be BHP’s largest since the $3.1 billion spinoff of its steel unit in 2002.

“Investors will have a lot to contend with, not only with the remaining BHP business but the outlook for the demerged entity as well,” Tim Schroeders, a portfolio manager at Pengana Capital, who helps manage $1-billion in equities, including BHP, said on Tuesday in an interview on Bloomberg Television before the results.

BHP shares rose 1.4% to close at A$39.68 (R393)in Sydney trading, before the producer’s full-year financial results were announced. Australia’s benchmark S&P/ASX 200 index advanced 0.7%.– Bloomberg

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