BHP Billiton created of new global metals and minning company

BHP Billiton today said it plans to create an independent global metals and mining company based on a selection of its high-quality aluminium, coal, manganese, nickel and silver assets. Separating these businesses via a demerger has the potential to unlock shareholder value by significantly simplifying the BHP Billiton Group (‘Group’) and creating two portfolios of complementary assets.

 

Once simplified, BHP Billiton will be almost exclusively focused on its exceptionally large, long-life iron ore, copper, coal, petroleum and potash basins. With fewer assets and a greater upstream focus, the Group will be able to reduce costs and improve the productivity of its largest businesses more quickly. As a result, its portfolio is expected to generate stronger growth in free cash flow and a superior return on investment.

 

Many of the assets selected for the new company (‘NewCo’) are among the most competitive in their industries. They include BHP Billiton’s Aluminium and Manganese businesses and the Cerro Matoso Nickel, Energy Coal South Africa, Illawarra Metallurgical Coal and Cannington Silver-Lead-Zinc mines. Together they would form a global metals and mining company with assets in five countries and a dedicated board, management team, corporate structure and strategy specifically designed to enhance their performance.

 

BHP Billiton Limited and Plc shareholders would be entitled to 100 per cent of the shares in NewCo through a pro-rata in-specie distribution. It is intended that NewCo would be listed on the Australian Securities Exchange and would have an inward secondary listing on the Johannesburg Stock Exchange.

 

BHP Billiton Chairman, Jac Nasser, said: “For over a century, BHP Billiton has progressively reshaped its business to maintain its industry leadership. 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 new company would be established with strong leadership. Its Chairman would be David Crawford who will retire from the BHP Billiton Board in November 2014. David is one of Australia’s most respected company directors and chairmen. He has a deep understanding of the resources industry and nearly 20 years on the Board of BHP Billiton. The Board believes David’s experience and skills make him the right person to guide the new company through its entry into the global resources sector.

 

“In addition, we are pleased to announce that Graham Kerr, our Chief Financial Officer, would assume the role of Chief Executive Officer and Brendan Harris, Head of Investor Relations, would be Chief Financial Officer, both based in Perth, Australia. The importance of South Africa to the new company would be reflected in the formation of its board management team, as well as its commitment to the country’s economic development and transformation objectives.”

 

BHP Billiton Chief Executive Officer, Andrew Mackenzie, said: “As a result of the extensive investment we have made in recent years, and the transformational growth of our major businesses, we now have two great companies embedded within our portfolio. This plan would enable both to achieve their full potential and create new opportunities for our people and communities.

 

“In a single step, we will significantly increase BHP Billiton’s focus on the exceptionally large resource basins that underpin its competitive advantage. As we move towards a simpler portfolio, comprised of our pillars of Iron Ore, Copper, Coal, Petroleum and potentially Potash, we will become a higher-margin, higher-return business.

 

“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 US$3.5 billion per annum1 by the end of the 2017 financial year.”

 

He added: “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. We believe they will be more valuable in a purpose built, independent company than they would be in BHP Billiton. With experienced management and a strategy and cost structure tailored to the scale of its businesses, the demerged company would be well placed to create substantial additional value for shareholders and rewarding careers for employees.”