September 2014
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World Coal
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5
B
HP Billiton has confirmed its plans to
demerge many of its non-core assets
to create a new global metals and mining
company. In a press statement last month,
the company said the assets it would spin off
would include its South African thermal coal
and New South Wales (NSW) metallurgical
coal businesses, as well as its aluminium and
manganese businesses, the Cerro Matoso nickel
mine and the Cannington silver‑lead‑zinc
mines.
“For over a century, BHP Billiton has
progressively reshaped its business to maintain
its industry leadership,” said Jan Nasser,
BHP Billiton’s chairman. “We believe the
proposed demerger, if implemented, will
accelerate the simplification of the group’s
portfolio, provide investors will choice and
unlock value in both companies.”
NewCo gets some coal assets...
The new company – dubbed NewCo by
BHP Billiton – would have primary listing
on the Australian Securities Exchange with
a secondary listing in Johannesburg. Shares
in NewCo would be distributed to current
BHP Billiton shareholders on a “pro-rata in
specie” basis.
NewCo’s coal assets will make it a
significant exporter of metallurgical coal
into Asia from its Illawarra operations in
NSW. These include three underground
mines in the southern coalfields of the state
– Appin, West Cliff and Dendrobium – as
well as the West Cliff and Dendrobium coal
preparation plants.
On the thermal side, the new company
will be endowed with BHP Billiton Energy
Coal South Africa (BECSA), which ranks as
the third largest exporter of South African
thermal coal. BHP Billiton owns 90% of
BECSAwith a further 2% owned by its
employees and 8% owned by a Black
Economic Empowered consortium led
by Pembani Holdings. It comprises four
primary coal mining operations at Khutala,
Klipspruit, Middelburg and Wolvekrans, as
well as three coal preparation plants, near
the towns of eMalahleni and Middelburg in
Mpumalanga Province.
The new company will be headquartered
in Perth and be listed on the Australian
Securities Exchange with a secondary listing
in South Africa. Graham Kerr, BHP’s current
chief financial officer, will become the new
company’s CEO with David Crawford – the
longest serving BHP director – as chairman.
… but BHP Billiton remains
committed to coal
However, these divestments do not mark a
complete departure from the coal industry
for the world’s largest miner. Coal remains
one of the company’s four pillars and, with its
Queensland coal operations, it will remain the
leading global exporter of metallurgical coal.
It is also retaining thermal coal assets in the
Hunter Valley of NSW, as well as its stake in
the Cerrejon coal mine in Colombia.
“By concentrating on what we do best,
the development and operations of major
basins, we can improve our productivity
further, faster and with greater certainty,”
said Andrew Mackenzie, BHP Billiton’s CEO.
“As we move towards a simpler portfolio,
comprising our pillars of iron ore, copper,
coal, petroleum and potentially potash, we
will become a higher-margin, higher-return
business.”
These assets provided 96% of the company’s
earnings for the twelve months to June 2014,
although coal only contributed US$ 386 million
– or 2% – to the total, prompting some analysts
to questions its place in the BHP Billiton’s
long‑term future.
Do more asset sales lie ahead?
The demerger is subject to final board,
shareholder and third-party approvals and is
expected to be completed in the first six months
of 2015. But despite the size of its divestment,
BHP Billiton may not be finished yet: the
company said it is continuing to review its
New Mexico Coal and Nickel West operations,
as well as its smaller petroleum assets. “Each
of these assets is subject to its own study
and the group will only pursue options that
maximise value for its shareholders,” it said in
a statement.
BHP Billiton New Mexico Coal owns the
San Juan coal mine in New Mexico, which
provides coal to the nearby San Juan generation
station. Last year, it announced that it had
reached agreement with the Navajo Nation for
the tribal group to buy the Navajo mine, which
supplies coal to the Four Corners coal-fired
power plant, in a deal worth US$ 85 million,
protecting more than 800 jobs in the process.
INTERNATIONAL
BHP Billiton demerges South African and New South Wales coal assets
