http://www.theaustralian.com.au/business
BHP Billiton’s simplification drive under chief executive Andrew Mackenzie has hit a snag as it decided to pull the sale of the loss-making Nickel West after failing to secure an acceptable price.
Nickel West, which BHP most wanted to sell off, is the collection of Western Australian nickel assets picked up by BHP with its 2005 acquisition of WMC Resources.
That BHP has not been able to find a buyer is not a complete surprise as the assets were pointedly not good enough to be included in BHP’s spin-off of NewCo, announced in August.
NewCo is a $20 billion company that would join the stock exchange lists next year holding BHP’s other unwanted assets (South American nickel, aluminium, South African coal and manganese) outside of its “four pillars’’ of iron ore, copper, petroleum and coal.
“We believe that Nickel West is neither a good fit with BHP Billiton nor with NewCo,’’ Mr Macknezie said in August. He cited the maturity and complexity of the business as the reasons for not including it in NewCo, or BHP itself.
BHP was encouraged to test the market for a trade sale of Nickel West in May when nickel climbed to $US21,000 a tonne following Indonesia following through with its ban on the export of unprocessed nickel ores in January.
But the rise of the Philippines as an alternative supplier of laterite nickel ores to China’s nickel pig iron industry has seen nickel prices slump to $US15,451 a tonne, a fall of 26 per cent since the May peak which prompted BHP to seek buyers for the unloved Nickel West.
The favoured bidder for Nickel West was Ivan Glasenberg’s Glencore, with analysts valuing the assets at anywhere between $250 million and $1bn.
The wide variance in valuations reflects differing metal price and exchange rate assumptions, as well as differences in estimates of the environmental and rehabilitation legacies that would come with the business.
Deutsche valued Nickel West at $US321m, including an assumed $US1.2bn in total closure costs come 2025. Glencore is believed to have offered $US200m for the business, with its main competition coming from China’s Jinchuan.
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