BHP Billiton Limited (BHP)

By Jason Fittler,

BHP Billiton's decision to split unwinds one of the biggest mergers in mining history. 

It creates a new mid-size metals player that may yet become a prime takeover target for its rivals.

BHP Billiton, the world's largest mining company by revenue will split into two entities.

One, still named BHP Billiton, will hone its focus on its most profitable assets in iron ore, copper, coal, oil and gas.

The other provisionally named "NewCo". It takes BHP Billiton's nickel, manganese, silver, aluminium and some coal mines. These divisions employ around 25% of BHP Billiton's current workforce. But deliver less than 10% of its profits.

The newly created mining company will be headquarters in Perth. And will own assets from Australia to Brazil.

Its operations in Australia include, the Cannington silver mine, and Illawarra coal mine. The Mozal aluminium smelter in Mozambique and the Energy Coal South Africa business.  

The company will have a primary listing in Australia and a secondary listing in South Africa,

The announcement of NewCo sent BHP Billiton's shares tumbling almost 5% on Tuesday.

NewCo's listing in Australia could cause problems for London-based fund managers. Their investment mandates sometimes prevent them from owning shares in overseas listed companies. 

The speculation is that NewCo could be subject of takeover as such you may see the share price increase onlisting.

Glencore PLC,  Xstrata PLC and X2 Resources are possible companies that may show interest in this new company.

For more information about BHP Billiton Limited (BHP) please contact us on 07 4771 4577.