BHP Billiton pushes ahead with mega demerger

The new company will include BHP’s aluminium, silver, South African coal, managanese and nickel businesses

A reclaimer at work on a BHP Billiton iron ore stockpile at Port Hedland in Western Australia (EPA)

BHP Billiton, the world’s biggest miner, has pulled the trigger on a demerger of a host of its lesser mines to create a new business valued at up to $15 billion (£9.3 billion).

The new company, as yet unnamed but dubbed “Spinco” by analysts, will list in Australia and Johannesburg but not in London, where BHP shares are traded.

It will include BHP’s aluminium, silver, South African coal, managanese and nickel businesses. It will employ 240,000 people and be headed by BHP’s current finance director Graham Kerr.

The news came as BHP reported a 10 per cent rise in annual profits to $13.4 billion, slightly below City forecasts of $13.6 billion. Its shares fell 4 per cent, or 82p, to 1985p.

“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,” said BHP chief executive Andrew Mackenzie. “We believe they will be more valuable in a purpose-built, independent company than they would be in BHP Billiton.”

The move comes after a decade of rapid expansion by global mining giants which has seen them spend more than $600 billion on acquisitions with mixed results. BHP Billiton was itself the product of a massive merger in 2001.

There had been speculation that Mick Davis, a former boss of Billiton and then founder of Xstrata which was taken over by Glencore last year, might be a potential bidder for BHP’s unwanted assets.

But the fact that Mackenzie is pushing ahead with the demerger suggests that the $3.75 billion Davis has raised in his latest vehicle, X2 Resources, may go elsewhere.

Mackenzie said the leaner BHP would “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.”

The new company will be based in Perth, Western Australia. It chose not to list in London because it was unlikely to qualify for inclusion in FTSE indices.