BHP Billiton set to demerge aluminium, bauxite and nickel assets

Investors have welcomed news that mining giant BHP Billiton appears set to establish a separate $20bn company comprising its aluminium, bauxite and nickel assets.

The global mining giant issued a statement on Friday saying a demerger of assets is its preferred option after announcing in April that it is studying the next phase of simplification, including structural options.

“A demerger of a selection of assets is our preferred option,” BHP said in a statement.

Stocks rose about 2.46% on Friday afternoon after the market received news of the demerger. BHP shares rose 94c to $39.10 by 4pm.

The company says a portfolio focused on its iron ore, copper, coal and petroleum assets would retain the benefits of diversification, generate stronger growth in cash flow and a superior return on investment.

“By increasing our focus on these four pillars, with potash as a potential fifth, we will be able to more quickly improve the productivity and performance of our largest businesses,” the company said.

Since April, the company’s board has continued to study structural alternatives, which it examined at a meeting this week.

“The board expects to consider this, and other matters, when it reconvenes next week,” the company said. “If any material decisions are made, they will be announced immediately.”

It is understood that a team advised by investment bank Goldman Sachs has been working on Project River, which is examining a number of strategic options, including a demerger, for assets that do not provide adequate returns to shareholders.

Deutsche Bank analysts have said they will be looking for any portfolio restructuring, such as the widely flagged sale of the company’s Nickel West mining assets in Western Australia amid stronger nickel prices, when the company delivers its annual financial results on Tuesday, 19 August.