BHP – Page 42 – Republic of Mining

UPDATE 4-BHP announces spin-off plan, no share buyback for now – by Sonali Paul and Silvia Antonioli (Reuters India – August 19, 2014)

August 19, 2014

http://in.reuters.com/

MELBOURNE/LONDON, Aug 19 (Reuters) – The world’s biggest mining company, BHP Billiton , announced plans to spin off businesses worth an estimated $16 billion, most of them acquired in a 2001 merger, to focus on its most profitable activities.

But it held off on a share buyback, disappointing investors who had hoped to receive around $5 billion. BHP’s London-listed shares fell 4.5 percent on Tuesday.

Chief Executive Andrew Mackenzie said the widely expected move to simplify BHP around the “four pillars” of iron ore, copper, coal and petroleum – with potash as a potential fifth pillar – would spur cashflow growth and boost returns.

These assets generated 96 percent of the group’s underlying core profit in the 2014 financial year.

“A demerger is a logical next step for other high quality assets also in our portfolio that don’t have a scale of those in our major business,” Mackenzie said in a call with investors.

The spin-off company, dubbed NewCo for now, will bundle BHP’s aluminium, manganese, Cerro Matoso nickel in Colombia, South African energy coal, some Australian metallurgical coal assets and the Cannington silver, lead and zinc mine. It will not include Nickel West in Australia, for which a separate sale process was continuing, Mackenzie said.

Rio and BHP tighten grip on world iron ore – by John Addis (Sydney Morning Herald – August 18, 2014)

August 19, 2014

http://www.smh.com.au/

Mexican drug cartels have been diversifying into the iron ore business, smuggling ore worth about $US1 billion a year into China. But it’s the emergence of a more legitimate cartel – one run largely by Australians – that should worry China more.

Rio’s latest result shows how powerful the big three global producers have become. The company’s results for the six months to June 30, with underlying earnings rising 21 per cent to $US5.1 billion ($5.47 billion), are remarkable given that iron ore prices actually fell 20 per cent over the period.

After slashing costs, capital expenditure and debt, management hinted at higher dividends and more buybacks. If the mining boom is supposed to be over, no one told Rio Tinto.

The really interesting element to the result concerned production increases. Although lower iron ore and coal prices stripped $US1.4 billion from underlying earnings, volume increases, particularly in iron ore, offset that fall by more than $US900 million. All up, iron ore contributed more than 90 per cent of total profit.

With China slowing and the country’s government frantically shifting spending away from capital expenditure towards consumption, which dampens demand for ore, Rio Tinto and BHP are expanding output.

COLUMN-BHP Billiton demerger shows how good a deal Billiton got – by Clyde Russell (Reuters U.K. – August 18, 2014)

August 18, 2014

http://uk.reuters.com/

Clyde Russell is a Reuters columnist. The views expressed are his own.

LAUNCESTON, Australia, Aug 18 (Reuters) – BHP Billiton’s plan to demerge its unwanted aluminium, nickel and manganese assets underscores just what a fantastic deal shareholders in the old Billiton got when the two joined in 2001.

When Australia-based BHP joined forces with the London-listed, but largely South African, Billiton, a diversified natural resources giant was created.

At the time it was largely viewed as a deal that favoured Billiton shareholders. BHP shareholders got about 58 percent of the merged entity, while Billiton’s got 42 percent, meaning that BHP paid about a 20 percent premium to Billiton shareholders, according to a March 19, 2001 report in the Wall Street Journal.

With the Aug. 15 news that BHP Billiton’s board favours a demerger, the 2001 deal comes full circle. While it’s unlikely to be an exact match, the bulk of assets proposed for the new spin-off company will be those that Billiton brought into the 2001 merger.

Billiton’s main assets in the 2001 merger were the Hillside and Bayside aluminium smelters in Richards Bay on South Africa’s east coast, the Mozal smelter in neighbouring Mozambique, and energy coal mines in South Africa.

UPDATE 5-BHP Billiton set to spin off unwanted assets – by Sonali Paul and Silvia Antonioli (Reuters U.K. – August 15, 2014)

August 18, 2014

http://uk.reuters.com/

MELBOURNE/LONDON, Aug 15 (Reuters) – Diversified mining company BHP Billiton declared its preference for a demerger of its aluminium, manganese and nickel assets on Friday, setting the stage for the formation of a separate business that could be worth at least $12 billion.

BHP said its board was considering a spin-off at meetings ahead of its annual results announcement next week. An Australian newspaper said those plans were well advanced and would include the Nickel West business that the world’s biggest miner has been trying to sell.

“A demerger of a selection of assets is our preferred option,” the company, which has a market capitalisation of $185 billion, said in a statement to the Australian stock exchange. BHP has long aimed to sell or spin off its manganese, aluminium and nickel assets, which contribute little to its earnings. Simplifying the company would “generate stronger growth in cash flow and a superior return on investment”, it said on Friday.

Some of the largest shareholders in BHP welcomed the announcement. “It’s good to see BHP taking the lead in the sector on this. It reassures you as a shareholder. It makes me more willing to have it as a significant bet within my fund,” said Christopher Moore, portfolio manager of Fidelity Global Industrials Fund.

BHP Billiton’s thirst triggers an outback water fight – by Sarah Martin (The Australian – August 9, 2014)

August 8, 2014

http://www.theaustralian.com.au/

SHANE Oldfield kicks the red rocks on his vast, dry pastoral lease north of Marree where he raises organic Angus beef for export.

The outback Clayton Station in northern South Australia has always been marginal farming land. With an average of 10cm of rain a year the property is dependent on water from the Great Artesian Basin in dry years.

“We are living in a desert, and without the basin we are non-existent,” Mr Oldfield says. “We haven’t had a decent rainfall since February 2012, so without the Great Artesian Basin we wouldn’t be here.”

But while accustomed to battling drought, the Oldfields now have another fight on their hands. The water level of the basin is dropping dramatically, raising fears that the pastoral land will become unviable.

The culprit, they say, is BHP Billiton, which pumps all of its water from the basin to its Olympic Dam mine and the Roxby Downs township 250km away. “BHP aren’t going to own up to the fact that they are sucking the guts out of the basin,’’ he tells The Weekend Australian.

“But they are. They want the water from this country because without the water they can’t mine, and the GAB water is the cheapest water they are ever going to get.”

COLUMN-Big 3 iron ore miners in volume, price sweet spot – by Clyde Russell (Reuters India – July 28, 2014)

July 28, 2014

http://in.reuters.com/

LAUNCESTON, Australia, July 28 (Reuters) – One thing has become clear from the latest production reports from the big three iron ore miners: They appear intent on ensuring their dominance by boosting low-cost output.

BHP Billiton mined a record 225 million tonnes of the steelmaking ingredient in the year to end-June, beating its own forecast by 4 percent. BHP said in its latest production report that it expects to increase output further, to 245 million tonnes in the 2014-15 financial year.

Fellow Anglo-Australian miner Rio Tinto boosted output 23 percent in the second quarter from the same period last year to 75.7 million tonnes. It also is forecasting higher annual output, with the quarterly report released on July 16 pointing to 2014 production of 295 million tonnes, up 11 percent from 266 million in 2013.

The world’s biggest iron ore miner, Brazil’s Vale , also had record output in the second quarter, posting a 12.6 percent gain to 79.45 million tonnes. The company is planning to boost its annual output to 450 million tonnes by 2018 from 306 million last year.

The three global iron ore giants have effectively gambled that they can continue to boost production and grab bigger slices of global demand, given that they can withstand lower prices due to their low-cost mines and economies of scale.

Life reflected in BHP’s figures – by Terry McCrann (The Australian – July 26, 2014)

July 25, 2014

http://www.theaustralian.com.au/business

BHP Billiton’s production figures effectively fired the starter’s gun for the annual profit season. They also neatly captured in microcosm the big questions about the future course of the overall economy.

Indeed, they were a much better guide to the future and its uncertainties than the June quarter CPI figures, released on the same day, which sent sections of the economentariat into a frenzy of hyperventilating certainty.

That’s a certainty that will no doubt last until some other statistic sends them hyperventilating in the opposite direction.

There’s no great surprise in the significance of BHPB’s numbers — oh for the day when it returns to the simplified BHP, sloughing off the second “B” along with all the rubbish it bought with Billiton.

BHPB remains our biggest company by far. While it won’t generate a profit this year all-but equal to the profits of all the four big banks combined, as it did a few years ago, it will still post a 2013-14 profit which will put any individual bank profit in the shade.

BHPB is not just the resources boom in miniature, it all but is the resources boom. OK, perhaps in combination with Rio Tinto, given the latter’s edge in iron ore, the resource that really “is” the boom, both in terms of dollars generated and its dominant centrality in our role in the China story.

Then perhaps we should add Twiggy Forrest’s Fortescue as not just the third iron ore major but also more directly representative of the “boom” aspect of the “resources boom”.

BHP sell-off could undo Billiton deal – by Danny Fortson (The Australian – July 14, 2014)

July 14, 2014

http://www.theaustralian.com.au/

The Sunday Times – A FEW days after Paul Anderson unveiled the largest merger in the history of the mining industry, the American boss of BHP went on a Sunday talk show to put politicians’ minds at rest. They were concerned that BHP, the 116-year-old national champion known as “the Big Australian”, was about to be lost to London.

Mr Anderson and Brian Gilbertson, head of smaller rival Billiton, had just announced a $US28 billion tie-up that would create a new natural resources Goliath.

Billiton was already listed in London. BHP, meanwhile, ran its giant oil operation from London. A relocation of the group headquarters from Melbourne seemed a distinct possibility. After all, the combined group would stretch across five continents and produce everything from diamonds and oil to nickel and iron. Why not run it from Europe’s financial capital?

The fears, Mr Anderson assured, were misplaced.

He said the merger was “a win-win”. There would be housekeeping to be done but a headquarters move would not be part of it. “I’m sure there will be two or three things in the portfolio that we will want to sell off … once we put the companies together,” he said.

Australia’s big three miners look to tighten their iron grip – by Jamie Smyth (Financial Times – July 8, 2014)

July 9, 2014

http://www.ft.com/intl/companies/mining

Port Hedland – The man who made a US$10bn bet on the global iron ore market is predicting Australia’s big three miners will tighten their grip on the global industry over the next few years as higher cost producers fall victim to lower iron ore prices.

Andrew “Twiggy” Forrest, founder and chairman of Fortescue Metals Group, says the sharp fall in iron ore prices since the start of the year is causing some smaller Australian producers and overseas competitors to exit the industry.

“Because you have incredibly low operating costs with the big Australian producers we are seeing more substitution take place from China and India as competitors switch off production,” says Mr Forrest, who owns one-third of Fortescue shares.

“The wholesale shutting down of iron ore production industries basically happens in other countries. The Pilbara [in Western Australia] has always been historically the big player.”

BHP nickel sale hits hurdle – by Nick Evan (The West Australian – July 9, 2014)

July 9, 2014

https://au.news.yahoo.com/thewest/

A native title ruling could throw a shadow over BHP Billiton’s attempts to sell its Nickel West assets, after the Federal Court ruling last week paved the way for native title claims over BHP’s Kambalda nickel concentrator and Gold Fields’ St Ives mine.

In a decision released last week, the Federal Court ruled that the transfer of mining tenements from State Agreements between 2004 and 2007 should have triggered negotiations for a land use agreement with the Ngadju people, who claim native title over the region around Norseman and Kambalda.

The ruling covers more than 200 mining leases transferred from State agreements originally held by Western Mining Corporation.

They include leases over BHP’s Kambalda nickel concentrator and Gold Fields’ 400,000 ounce-a-year St Ives mine, the fourth largest gold producer in Australia last year.

Gold Fields said in January the action could force the closure of St Ives if the native title claimants sought an injunction to do so.

But the company softened its rhetoric this week, saying in a statement the decision “does not affect the grant of mining tenure to St Ives”. It added operations would continue as usual pending the outcome of the process.

BHP Billiton looks to catch up to Rio Tinto in ironman contest – by Amanda Saunders (The Age – July 7, 2014)

July 7, 2014

http://www.theage.com.au/business

Miner BHP Billiton is confident it can ”close the gap” with iron ore arch-rival Rio Tinto on margin per tonne within a few years.

And it is likely to develop the $20 billion outer-harbour project at Port Hedland rather than expand its inner-harbour operation if it moves to produce beyond its current annual run rate target of 270 million tonnes. BHP president of iron ore Jimmy Wilson says the miner is trailing Rio on margin per tonne, and ”our desire absolutely is to close that gap”.

He said the miner would never be in a competition with Rio on volumes but stressed ”where we would like to compete is on the cost of production side, more importantly, the margin per tonne that we make”.

”While we are marginally behind Rio at the moment, we’ve got to back the fact that we are going to eliminate that gap in the foreseeable future,” he says.

”What is the foreseeable future? I’d be disappointed if it took more than a couple of years. ”I do respect our competitors – Rio, Fortescue, Vale – [and] none of them is standing still either. So, I think, at the end of the day, you are going to see an improvement come through for all of those businesses.”

Trafigura Among Six to Enter BHP Nickel Sale, Review Says – by Ben Sharples (Bloomberg News – July 06, 2014)

July 7, 2014

http://www.businessweek.com/

Trafigura Beheer BV and Sherritt International Corp. (S) are among six companies to enter the sale process for BHP Billiton Ltd.’s Australian nickel unit, according to a report from the Australian Financial Review.

Glencore Plc, X2 Resources, Jinchuan Group Co. and MMG Ltd., a unit of China Minmetals Corp., are also among bidders that have started due diligence on BHP’s Nickel West business, the newspaper reported today, without saying where it got the information. Emily Perry, a Melbourne-based spokeswoman for BHP, declined to comment in an e-mailed response.

BHP said in May it’s considering selling all or part of its Australian nickel unit as prices surge amid an Indonesian export ban on the steel hardening agent. The due diligence process may take months and BHP is keen to finalize a deal by the end of the year, the newspaper said. The business may be worth more than A$800 million ($749 million), according to the newspaper.

Michael Oke, a spokesman for London-based X2 Resources, Francis de Rosa, a Sydney-based spokesman for Glencore, and Kathleen Kawecki, a Melbourne-based spokeswoman for MMG, didn’t immediately respond to e-mails sent outside of normal business hours seeking comment on the sale process. Three calls to Gao Tianpeng, the general manager of Jinchuan’s asset operation department, went unanswered.

Amsterdam-based Trafigura and Toronto-based Sherritt didn’t immediately respond to e-mails seeking comment.

BHP Billiton Passes on [Vancouver] Potash Export Facility – by Rhiannon Hoyle (Wall Street Journal – June 25, 2014)

June 25, 2014

http://online.wsj.com/home-page

SYDNEY— BHP Billiton Ltd. BHP.AU -0.69% let an exclusivity agreement lapse that would have given it the right to develop a potash export facility for its Canadian Jansen project at Washington state’s Port of Vancouver.

The world’s biggest miner wants to build its potash unit into a “fifth pillar” of its business alongside commodities such as iron ore and copper. BHP said it decided not to renew the agreement for Port of Vancouver’s near-100-acre terminal five site as it evaluates how quickly it needs to bring the Jansen project into production. The exclusivity arrangement expired last week.

A BHP spokeswoman said the move would allow management to “to actively investigate and assess alternative rail and port options” in Canada and the U.S., although BHP declined to comment on what could be the other leading options for fertilizer export.

“We have said we will continue to modulate the pace of Jansen development as we time our entry into the potash market to meet market demand,” the spokeswoman said in an emailed statement. “This disciplined approach gives us the flexibility to consider a broad range of options for the rail and port, including the Port of Vancouver.”

China Miners’ Loss Is BHP’s Gain as Iron Prices Slump 44% – by (Bloomberg News – June 20, 2014)

June 20, 2014

http://www.businessweek.com/

Rio Tinto Group and BHP Billiton Ltd. (BHP), two of the world’s biggest iron ore producers, are benefiting as falling iron ore prices pressure smaller rivals in China to shut down.

The price of iron ore has plunged 44 percent from its February 2013 peak on the back of record output. That’s hurting mining companies in China where 20 percent to 30 percent of mines have closed, according to the China Metallurgical Mining Enterprise Association.

The closures are helping Rio Tinto and BHP which, along with Vale SA (VALE5), already control about two thirds of global seaborne supply from their low-cost mines. About $40 billion a year of iron ore is mined in China, the country that’s also the world’s biggest buyer of the steelmaking component.

“Many smaller mines in China have stopped production due to the falling prices,” said Sarah Wang, a Shanghai-based analyst with Masterlink Securities Corp. “It’s the right time for BHP and Rio to seize the opportunity to boost their market share.”

BHP, the world’s biggest mining company, last month also flagged the closure of some Chinese ore mines.‘ “Most of them are smaller ones, while the bigger ones are also starting to be affected,” Liu Xiaoliang, the association’s general secretary, said in an interview. “Almost 70 percent of the ore processing companies have also closed.”

Mackenzie forges BHP Billiton’s path with touch from the past – by James Wilson (Financial Times – June 10, 2014)

June 12, 2014

http://www.ft.com/home/us

For BHP Billiton, less is more. Diamonds from the edge of the Arctic, copper from Arizona’s desert and titanium from dunes by the Indian Ocean: all are assets that the world’s most valuable resources group accumulated and subsequently decided it could perfectly well live without.

To that list of assets, sold by the miner since 2012, can be added facilities from nickel plants in Australia to South African manganese mines. An array of BHP Billiton’s assets are up for potential divestment in what Andrew Mackenzie, chief executive, says is a retreat from complexity.

“The case for continued simplification of our portfolio is compelling,” he told investors last month. This could go beyond piecemeal sell-offs, with the miner looking at “structural options” – an allusion to a possible spin-off of assets into a separate vehicle.

What shape this could take is open to question. But if most assets deemed non-core are included it would in effect leave BHP without most of what it agreed to acquire when, in 2001, it announced its landmark merger with Billiton.
Then, the Billiton assets were “a sensational fit” with BHP, in the words of Paul Anderson, first chief executive of the combined group. Now, with a few exceptions they are fringe businesses.