BHP Billiton Ltd. (BHP), the largest mining company, may consider selling about $10 billion of aluminum, nickel and coal mines and smelters as it trims its portfolio, Deutsche Bank AG said.
The $4.7 billion Cannington silver, lead and zinc mine and the $1 billion Worsley alumina smelter in Australia are among the possible candidates, Deutsche Bank resources analysts Paul Young, Kaan Peker and Grant Sporre said yesterday in a report.
Chief Executive Officer Marius Kloppers said in December that BHP may trim some of its assets and products in the next decade as spending increases on shale gas, iron ore, coking coal and potash. BHP will continue to rationalize its portfolio, he reiterated yesterday when the company reported first-half profit.
“The potential disposal proceeds are significant but we believe that BHP Billiton will be in no hurry to harvest these options,” they said. ”The challenge for BHP Billiton is both in timing the harvest to achieve maximum value and ensuring that these assets attract sufficient investment and attention in the meantime to remain attractive to prospective buyers without being significant cash sinks.”
Kelly Quirke, a Melbourne-based spokeswoman for the company, declined to comment.
The company’s aluminum unit, which is valued at $2.2 billion, may also be a sale candidate, the analysts said. It includes smelters in South Africa, a stake in a smelter in Mozambique and bauxite mine in Brazil. Other candidates are its coal mines in New Mexico, valued at $792 million, and its Nickel West operations in Australia at $1.3 billion, they said.
These assets may be worth as much as $12.5 billion, based on a peer group comparison, they said.
BHP announced a review of its diamond business last November, saying it will probably sell some, or all, of the unit, and agreed the following month to sell its 51 percent stake in a Canadian diamond project to Peregrine Diamonds Ltd. It won’t make big investments in nickel and aluminum, Kloppers said.
BHP agreed this month to sell its 37 percent stake in Richards Bay Minerals for an undisclosed sum to Rio Tinto Group exit the titanium minerals industry.
A “piecemeal” sale of aluminum assets was more probable than listing the assets as a separate company,” Deutsche Bank said. “Especially in their Brazilian and Mozambique assets where the company holds minority stakes.”
BHP this month cut the mining rate at Nickel West in Western Australia by 30 percent, citing lower metal prices and the high Australian dollar.
“BHP Billiton is unlikely to sell the entire Nickel West operation, as this would effectively signal the company’s exit from nickel,” they said. “However, BHP Billiton’s current move away from downstream processing means that this business would be less attractive.”
BHP could also sell its Yeelirrie uranium project in Australia and some petroleum assets, Citigroup Inc. said today in a report.