[miningmx.com] – SPECULATION is riding high that BHP Billiton will take a major constituent of its formation full circle with the proposed listing in Johannesburg tomorrow (August 19) of the assets that once comprised Billiton – minus Richards Bay Minerals (RBM).
In 2001, Brian Gilbertson merged Billiton, which was comprised of South African assets which he had listed in London in 1997, with the then faultering BHP in Melbourne to form the basis of the current BHP Billiton.
Following a review of its portfolio amid the commodity sell-off from 2011, and presumably having failed to attract decent enough bids for its non-core assets piecemeal, BHP Billiton is set to demerge assets thought by analysts to be worth between $12bn to $17bn.
The package of assets has a strong South African bent and may consist of some of the original Billiton assets including the thermal coal mines in BHP Energy Coal South Africa (Becsa), the aluminium smelters in Richards Bay and in Mozambique, and the manganese mines in the Northern Cape.
RBM is thought not to be included in ‘spinco’, however.
“Inevitably this will be seen as BHP Billiton’s exit from South Africa, but if you think about it, it makes sense to do this if they weren’t able to get good enough offers for its non-core assets,” said Des Kilalea, an analyst for RBC Capital Markets.
Included in ‘spinco’ will be some Australian manganese and nickel assets (Nickel West) as well as BHP Billiton’s stake in Colombia coal producer, Cerrejon, it has been speculated.
“We assume all nickel, manganese and aluminium assets are spun out along with Cannington to provide greater cash flow and debt capacity,” said Macquarie Research in a note dated August 15.
It thought it wasn’t clear if thermal coal was considered one of the four pillars that BHP Billiton said it wanted to form the basis of its future portfolio (which also included base metals (copper), coking coal, petroleum and iron ore with potash as a possible fifth).
Assuming the thermal coal was spun-off in the new company, the entity would be worth about $17bn, said Macquarie Research. It added ‘spinco’ would generate $780m in pretax profits and carry some $1bn in net debt.
Goldman Sachs said today non-core assets could be taken to include thermal coal, aluminium, nickel and manganese, adding however that “… a selection or all of these assets could find their way in to a demerged entity”.
The Financial Review speculated that Graham Kerr, BHP Billiton’s CFO, would run the new company from Perth.
If the demerger materialises – BHP Billiton said in an announcement last week that it was still to convene to discuss the strategy – it would be interesting to see whether South African investors demonstrated more appetite for it than shown for Glencore when it listed in Johannesburg in November.
In order to be indexed in the top 100 shares on the JSE, about 5% of the company’s share register would have to be in South African hands. As of March, only 1% of Glencore’s register consisted of direct South African investment.
“We haven’t got to 5% but we will wait 12 to 18 months to judge the achievement. We can get there and there is investment appetite and knowledge,” said Ivan Glasenberg, CEO of Glencore in March.
Analysts also said the listing of BHP Billiton’s spinco in Johannesburg, as well as Sydney as speculated, would also require either an on-market buy-back to appease UK investors, or cash compensation – which would rule out the possibility of a formal buy-back of shares.
