[miningmx.com] – SHAREHOLDERS in BHP Billiton gave support to the demerger of assets that will create South32, the coal, manganese, aluminium and nickel company that is scheduled to spring into life as a listed company on May 18.
The Melbourne-headquartered group said today that the demerger resolution, heard jointly at annual general meetings in Australia and London, achieved a 98.05% approval, equal to 2.96 billion votes. These votes were opposed by 58.9 million votes against the resolution while 8.7 million votes abstained.
South32 will list in Perth, Johannesburg and London, the latter on a when-issued basis, on May 18 – a date that will attract enormous attention in the mining world owing to speculation the company would debut amid near rock-bottom sentiment in the commodity and metals markets.
The valuation of the company has fallen to between $5bn to $10bn from earlier estimates of $12bn to $15bn, owing to unremitting weakness in metal prices, according to analysts.
However, BHP Billiton chairman, Jac Nasser, said today ahead of the resolution vote, that the decision to demerge South32 was neutral in its timing.
“This demerger is largely neutral with regard to timing of commodity cycles. It does not crystallise value for shareholders at a particular point in the cycle and generally gives shareholders an ownership choice,” he said.
BHP Billiton shareholders will receive a South32 share for every BHP share held and will be offered dividends from both companies. In addition, BHP Billiton said it had no plans to rebase its dividend.
The demerger is BHP Billiton’s effort to allow the market find a price assets it believed to be non-core after attempting to earlier sell some of them piecemeal. They include coal and manganese mines in South Africa, Colombia and Australia, and smelter facilities in Australia and Mozambique.
Yet there may well be selling pressure on South32 regardless of its listing price, according to Reuters. The newswire said earlier today that UK investors cannot hold the stock as it will not be included in the FTSE indexes.
However that is likely to be offset by passive funds in Australia buying South32 shares as they will be included in the major S&P/ASX indexes, Reuters added.
Instructively, equity prices for large mining firms have tended to fall at a lower rate than the underpinning metal prices, according to a report by Investec Securities.
It observed that since the start of 2014, Glencore’s share price was down only 6%, Rio Tinto down only 10%, American down 12%, and BHP Billiton down 16% (all in US$ terms), despite a 55% fall in the iron ore price, a 35% fall in Brent, and 10% fall in copper.
