NEW YORK (The Deal) -- BHP Billiton (BHP) will spin off aluminum, manganese, coal, nickel and silver operations from Australia to South Africa to create a new mining company that could be worth as much as $17 billion.
BHP's CEO Andrew Mackenzie confirmed the plan, which was hinted at on Friday, ahead of his company's annual results conference on Tuesday, August 19.
"A demerger will maximize value for our shareholders," he said.
The new company will have 11 main assets including BHP's Colombian Cerro Matoso Nickel business, Energy Coal South Africa, Aluminum South Africa and Australian operations including manganese producer Gemco, aluminum unit Worsley, Illawarra Metallurgical Coal and the Cannington silver, lead and zinc mines.
The Deal's Paul Whitfield on why BHP is splitting up the company and what it means for shareholders:
BHP, like many of its rivals, has spent years seeking to offload underperforming and sub-scale businesses, many of which were acquired prior to 2007 on expectation of long-term increases in global commodity prices. Those hopes foundered on slower-than-expected growth in China, and the global economic slump triggered by the 2007/08 financial crisis. Mining companies including BHP and its closest rival Rio Tinto (RIO) were forced to swallow huge write-downs and changed tactics, and CEOs, to focus on improving shareholder returns and eschewed acquisitions.
Mackenzie, who replaced Marius Kloppers in early 2013, has turned its attention to a so-called "four pillar" strategy that is centered on BHP's largest and most profitable operations in petroleum, potash, copper, iron ore and coal. The four business units - petroleum and potash are combined in the BHP model - together account for about 97% of BHP's underlying Ebitda, according to a company presentation.
BHP on Tuesday posted Ebitda of $32.4 billion for its financial year ending June 30, up 6.8% year-on-year. Underlying profit rose to $13.4 billion, up 23% on last year's figure of $11.2 billion.