BHP’s South32 Has a Big Plus: China’s Not Its Chief Customer – by David Stringer (Bloomberg News – May 4, 2015)

The mining industry’s biggest spinoff in almost a decade will offer investors a once unthinkable big plus. China’s not its biggest customer.

The world’s biggest buyer of metals will account for about 11 percent of sales for South32 Ltd., while parent BHP Billiton Ltd. and its biggest competitor Rio Tinto Group rely on China to generate more than a third of their revenue.

With less dependence on China and no iron ore mines, the new Perth-based company offers a different proposition to producers that have focused on feeding the Asian nation’s hunger for steelmaking, according to Aberdeen Asset Management Ltd.

The China story has changed since the start of the decade. Growth slowed last year to the weakest pace since 1990, while steel consumption will probably decline this year, according to the China Iron and Steel Association.

“If you’ve got a softening of growth in China, or a move to a more sustainable path, do you want all your eggs in that one basket?” said Andrew Preston, a Melbourne-based senior investment manager at Aberdeen, which oversees about $12 billion in Australia, including BHP shares.

South32 “gives you a bit of diversification, and it’s something that people will be factoring in to their models,” he said.

The creation of South32, which will be the biggest producer of manganese ore and have the world’s largest silver mine, is scheduled to be approved in a vote of BHP shareholders on May 6.

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