BHP weighing up portfolio options

BHP Billiton says it is actively studying the next phase of the simplification of its portfolio after a media report suggested it would spin off its struggling assets into a $A20 billion listed vehicle.

Kristie Batten

The Australian Financial Review reported today that the company was mulling separating its non-core aluminium, nickel and bauxite assets into a separate company to potentially be listed in Australia, London and South Africa.

The report said Goldman Sachs was assisting BHP with options for the assets.

BHP noted the speculation and reiterated that the simplification of its portfolio was a priority but it stopped short of confirming the specifics of the report.

“In the last two years alone, the group has announced or completed divestments in Australia, the United States, Canada, South Africa and the United Kingdom, including petroleum, copper, coal, mineral sands, uranium and diamonds assets,” BHP said.

“We believe that a portfolio focused on our major iron ore, copper, coal and petroleum assets would retain the benefits of diversification, generate stronger growth in free cash flow and a superior return on investment.

“By increasing our focus on these four pillars, with potash as a potential fifth, we will be able to more quickly improve the productivity and performance of our largest businesses.”

BHP said it was actively studying the next phase of the process, including “structural options”, but would only pursue options that would maximise value for shareholders.

The future of the aluminium, manganese and nickel assets has been the subject of speculation since CEO Andrew Mackenzie took over in May last year and outlined his “four pillars” strategy.

Glencore Xstrata CEO Ivan Glasenberg recently confirmed that BHP’s Nickel West assets in Western Australia were for sale and the company was considering them.

The assets comprise the Mt Keith open pit mine and concentrator, the Leinster operations, comprising two underground mines and a concentrator, the Kalgoorlie concentrator and smelter and the Kwinana refinery.

Nickel West produced 78,200 tonnes of nickel in the December 2013 half.

The division employs up to 3000 people.

BHP had confirmed in the past that there had been no major investment in capital in nickel and the business was largely running for cash so it wouldn’t be a “distraction to management”.

In its 2013 financial year results, BHP recorded a $US1.2 billion ($A1.3 billion) impairment on the Nickel West assets.

The business recorded revenue of $761 million but underlying earnings before interest and tax of negative $151 million.

Shares in BHP gained 1.7% to $A37.09.

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