BHP confirms multi-billion pound spin-off as miner turns its focus to five key pillars

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Anglo-Australian mining giant BHP Billiton has confirmed plans to spin off billions of dollars worth of assets into a separate new company as it seeks to streamline its own operations.

The £42bn firm, which is the world’s largest miner by market value, said the smaller new company will be based in Australia and will contain aluminium, coal, manganese, nickel and silver operations.

This will leave the larger group free to concentrate on what it calls the firm’s five key pillars – iron ore, copper, coal, petroleum and potash.

The announcement came as BHP posted a 10 per cent rise in underlying profit to £8.08bn for the year to the end of June, as it beat production guidance for iron ore, coal and petrol. Sales lifted 1.9 per cent to £40.4bn.

Analysts have said the assets in the new business, which will be listed in Australia and South Africa, could be worth as much as £7.2bn.

The new firm will appoint BHP’s finance director Graham Kerr as its first chief executive. It will have mines spread across a number of countries including South Africa, Australia, Mozambique and Colombia – and will employ around 24,000 staff.

BHP said, subject to shareholder and regulatory approval, it expects the demerger to be completed in the first half of 2015.

Under the structure of the deal existing shareholders in BHP will be entitled to all of the stock in the new business.

BHP Billiton was created out of the 2001 merger of two miners: Australia’s Broken Hill Proprietary Company (BHP) and the UK’s Billiton.

The group said the demerger would allow BHP to cut costs and improve productivity among its largest businesses. BHP Billiton chairman Jac Nasser, said: “We believe the proposed demerger, if implemented, will accelerate the simplification of the group’s portfolio, provide investors with choice and unlock value in both companies.”

Chief executive Andrew Mackenzie said: “As a result of the extensive investment we have made in recent years, and the transformational growth of our major businesses, we now have two great companies embedded within our portfolio. This plan would enable both to achieve their full potential.”