BHP Billiton to leave SA

2014-08-19 10:53

Mining giant BHP Billiton will spin off all its South African mines and smelters, including its local coal operation Billiton Energy Coal SA, the Hillside and Mozal aluminium smelters and its stake in local Manganese group Samancor.

These will get grouped with other silver, manganese, alumina and thermal coal operations in Australia in a new company (Newco) that will get listed on the Australian and Johannesburg stock exchanges, chief executive Andrew Mackenzie confirmed this morning.

Billiton itself will retain its enormous metallurgical coal, iron ore, petroleum and potash assets, Mackenzie said in a teleconference with journalists.

The company will in future focus exclusively on “huge” orebodies.

The “Newco” will also take over Billiton’s Cerro Matoso nickel operation in Columbia and some shares in Brazilian alumina companies.

Mackenzie denied that this amounts to divestment from South Africa.

The demerger is actually good for South Africa because the new company will give the local mines “stronger support”.

The dual listing and Johannesburg offices are a way of demonstrating Billiton’s “desire to be a champion for Africa”, he said.

About 9% of Billiton shareholders are South African and the company will keep its oil and gas exploration projects in South Africa, he said.

The splitting of Billiton into two will require many regulatory approvals as well as shareholder support.

According to Mackenzie, the process could be completed within the first half of next year.

Newco will be headquartered in Perth, with a “regional head office” in Johannesburg.

The chief executive will be current Billiton chief financial officer Graham Kerr and the current Billiton head of investor relations, Brendan Harris, will be the chief financial officer.

The effect is that Billiton itself will completely withdraw from South Africa, although Newco will get created by a “demerger”, with its shares being issued to the existing Billiton shareholders.

About half of Newco’s assets will be Australian and only a third South African, said Kerr.

There will be a fair amount of South Africans on the board, he promised.

Billiton is also promising that the demerger will have a “minimal” effect on the roughly 24 000 employees.

All Billiton’s collective agreements and terms of employment will stay in place.

The coal mines owned by Billiton Energy Coal SA produce about 13% of South Africa’s coal and Samancor, of which Anglo American owns 40%, produces more than a third of South Africa’s manganese ore.

The Hillside and Mozal smelters, which the new company will inherit, are in the middle of negotiations with Eskom around their contentious contract that ties their power tariff to the aluminium price.

This arrangement has caused Eskom large losses as it is forced to sell up to 7% of its electricity at below the cost of generating it.

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