BHP dismantles the empire

Mining giant BHP Billiton is to spin off some assets into a separate company. These include aluminium, manganese, nickel, silver and coal businesses, which in total generated around 7% of overall earnings in the year to June. The spin-off will be worth around $15bn and will float in Australia and South Africa.

What the commentators said

This break-up “is a definitive marker that the era of vaulting ambition is over for the miners”, said Ruth Sunderland in the Daily Mail.

After a decade of “full-blooded expansionism”, which included a string of failed bids worth $100bn, it is now dismantling the empire. “The division is logical”: it allows BHP to focus on its most profitable businesses.

The emphasis is on how to “feed the insatiable Chinese dragon ever more profitably”, said Robert Lea in The Times. The businesses left are in raw materials that comprise a fifth of China’s annual imports: petroleum and gas, iron ore, copper and coal.

BHP “has the bases covered” – it can cover China’s fossil-fuel needs, but also provide copper to connect wind farms as renewables expand.

What of the new spin-off? “We may surmise,” said Jonathan Guthrie in the Financial Times, that it “owns mines BHP did not get decent offers for during a two-year disposal programme”. Will its bosses be able to “invent a raison d’etre… more inspiring than relieving BHP of part of its conglomerate discount?”

It’s hard to see why investors would care much for it, said Swaha Pattanaik on Breakingviews. Investors in nickel or aluminium can find purer plays. Those seeking broader exposure will be more drawn to the more diversified Glencore.

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