Must-know: BHP’s South32 proposed de-merger remains on track



South32 de-merger remains on track

BHP Billiton (BHP) announced on December 8, 2014, that the new company it intends to create through a de-merger will be called South32. South32 will be an independent global metals and mining company based on a selection of high-quality aluminum, coal, manganese, nickel, and silver assets.

BHP Billiton (BHP) expects to release all shareholder documentation with full details of the de-merger in mid-March 2015, with a shareholder vote taking place in early May 2015. The proposed de-merger remains on track to be completed in the first half of the 2015 calendar year.

BHP Billiton intends that South32 will:

  • list on the Australian Securities Exchange
  • have an inward secondary listing on the Johannesburg Stock Exchange
  • pursue a standard listing on the main board of the London Stock Exchange
  • have an over-the-counter American Depositary Share program
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Strong financial performance

South32 assets are performing well with record manganese ore and alumina production and strong underlying financial performance. South32 generated free cash flow of $470 million, EBITDA of $1,393 million, and operating cash flow of $885 million.

The management commented that South32 will have its own bespoke strategy aimed at maximizing the potential of its quite different, but nonetheless high quality assets. Its two main assets, aluminum and nickel, are doing well in comparison to other commodities.

Mining companies that offer exposure to aluminum and nickel include Rio Tinto (RIO), Alcoa (AA), Vale SA (VALE), and MMC Norilsk Nickel (NILSY). These companies’ recent results have given rise to bullish comments on the commodities outlook. Funds like the SPDR S&P Metals & Mining ETF (XME) also offer exposure to the metals and mining sector. AA forms 3.6% of XME’s holdings.


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