BHP Billiton to spin off non-core portfolio

BHP has already been widely touting around its giant Australian nickel business with a reported price of at least $800 million

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

Shares in Anglo Australian mining giant BHP Billiton jumped almost 3 per cent in early trading after it said that it will spin off its non-core interests.

The decision means that recently appointed chief executive Andrew Mackenzie is firmly committed to returning the group to its BHP roots.

That involves unravelling much of the mining interests that came from the merger with Billiton more than decade ago and acquisitions made since by Mackenzie’s predecessors.

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 cash flow and a superior return on investment.”

It added: “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 has already been widely touting around its giant Australian nickel business with a reported price of at least $800 million (£479 million). A full-scale demerger of all its unwanted assets is likely to be worth far more than that.

The move also prompted speculation in some mining circles that the demerger could attract the interest of Mick Davis, the former Billiton finance director who last year sold Xstrata to Glencore and has already built up a $4 billion war chest in his comeback vehicle X2.

But Davis is more likely to want to buy BHP’s massive coal mining division rather than a rag-bag of different mineral resources.

Of the assets likely to be demerged nickel is the most attractive given the recent sharp price rise in the metal since Indonesia banned exports this year.

The demerger is set to be the biggest shake-up in the global mining industry after a decade of giant companies snapping up assets. It is likely to trigger a big payday for investment bankers and lawyers, who will be called upon to advise on separation of businesses in dozens of different countries.

BHP is due to report its annual results next week when it is likely to provide more detail on its demerger plans. Its shares gained 54p to 2079.75p.