BHP dismantles the empire

Mining giant BHP Billiton is to spin off some assets into a separate company, allowing it to focus on its most profitable businesses.

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

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.

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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.

Andrew Van Sickle

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.