BHP Billiton Spinoff Will Create a New Global Mining Company




One stays, and one goes—BHP Billiton’s decision to spin off some of its aluminum, coal, manganese, nickel and silver
assets doesn’t include its large Jansen potash project in Saskatchewan, Canada (top photo), but does involve its
Illawarra met coal operation (bottom photo) in New South Wales, Australia, among others. (Photos courtesy of BHP Billiton)

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