The $20bn question mark hanging over BHP Billiton’s non-core assets

BHP Billiton sent the market into overdrive yesterday with an ASX release that all but confirmed its intention to demerge its non-core assets.

While the mining giant has flagged its intention to sell parts of its business before, yesterday’s release was the first hint that a demerger option was the preferred divestment method.

“As we have said previously, the simplification of our portfolio is a priority and is something we have pursued for several years,” 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 free cash flow and a superior return on investment.

“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 said

This leaves aluminium, nickel and bauxite open to the next phase of simplification, including structural options.

The Age reports a team at Goldman Sachs has been ordered to work on several options, including a demerger and the sale of individual assets in a deal called “project river”.

The paper says a final decision has not been made but that work had “gathered momentum''.

There is speculation a demerged company worth $20 billion is the most likely option, and would include nickel, aluminium and steaming coal assets.

As part of the conjecture surrounding BHP’s statement, it is widely thought ex-Xstrata CEO , Mick Davis, who yesterday announced his company X2 resources had $3.75 billion to buy mining assets, would be interested in any BHP sell-off.


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