Wrap Text
Creation of New Global Metals and Mining Company
BHP Billiton Plc
Registration number 3196209
Registered in England and Wales
Share code: BIL
ISIN: GB0000566504
NEWS RELEASE
Release Time IMMEDIATE
Date 19 August 2014
Number 13/14
CREATION OF NEW GLOBAL METALS AND MINING COMPANY
TO ACCELERATE PORTFOLIO SIMPLIFICATION
BHP Billiton today said it plans to create an independent global metals and mining company
based on a selection of its high-quality aluminium, coal, manganese, nickel and silver assets.
Separating these businesses via a demerger has the potential to unlock shareholder value
by significantly simplifying the BHP Billiton Group (‘Group’) and creating two portfolios of
complementary assets.
Once simplified, BHP Billiton will be almost exclusively focused on its exceptionally large,
long-life iron ore, copper, coal, petroleum and potash basins. With fewer assets and a
greater upstream focus, the Group will be able to reduce costs and improve the productivity
of its largest businesses more quickly. As a result, its portfolio is expected to generate
stronger growth in free cash flow and a superior return on investment.
Many of the assets selected for the new company (‘NewCo’) are among the most competitive
in their industries. They include BHP Billiton’s Aluminium and Manganese businesses and
the Cerro Matoso Nickel, Energy Coal South Africa, Illawarra Metallurgical Coal and
Cannington Silver-Lead-Zinc mines. Together they would form a global metals and mining
company with assets in five countries and a dedicated board, management team, corporate
structure and strategy specifically designed to enhance their performance.
BHP Billiton Limited and Plc shareholders would be entitled to 100 per cent of the shares in
NewCo through a pro-rata in-specie distribution. It is intended that NewCo would be listed on
the Australian Securities Exchange and would have an inward secondary listing on the
Johannesburg Stock Exchange.
BHP Billiton Chairman, Jac Nasser, said: “For over a century, BHP Billiton has progressively
reshaped its business to maintain its industry leadership. We believe the proposed
demerger, if implemented, will accelerate the simplification of the Group’s portfolio, provide
investors with choice and unlock value in both companies. Our shareholders will have the
opportunity to vote on this proposal once the necessary approvals are in place.
He added: “The new company would be established with strong leadership. Its Chairman
would be David Crawford who will retire from the BHP Billiton Board in November 2014.
David is one of Australia’s most respected company directors and chairmen. He has a deep
understanding of the resources industry and nearly 20 years on the Board of BHP Billiton.
The Board believes David’s experience and skills make him the right person to guide the new
company through its entry into the global resources sector.
“In addition, we are pleased to announce that Graham Kerr, our Chief Financial Officer,
would assume the role of Chief Executive Officer and Brendan Harris, Head of Investor
Relations, would be Chief Financial Officer, both based in Perth, Australia. The importance of
South Africa to the new company would be reflected in the formation of its board and
management team, as well as its commitment to the country’s economic development and
transformation objectives.”
BHP Billiton Chief Executive Officer, Andrew Mackenzie, said: “As a result of the extensive
investment we have made in recent years, and the transformational growth of our major
businesses, we now have two great companies embedded within our portfolio. This plan
would enable both to achieve their full potential and create new opportunities for our people
and communities.
“In a single step, we will significantly increase BHP Billiton’s focus on the exceptionally large
resource basins that underpin its competitive advantage. As we move towards a simpler
portfolio, comprised of our pillars of Iron Ore, Copper, Coal, Petroleum and potentially
Potash, we will become a higher-margin, higher-return business.
“By concentrating on what we do best, the development and operation of major basins, we
can improve our productivity further, faster and with greater certainty. With a simpler
portfolio, we are targeting sustainable, productivity-led gains of at least US$3.5 billion per
annum 1 by the end of the 2017 financial year.”
He added: “The assets that would form the new company are not of the same size as those
in our major basins but many are among the largest and highest quality in their sectors. We
believe they will be more valuable in a purpose built, independent company than they would
be in BHP Billiton. With experienced management and a strategy and cost structure tailored
to the scale of its businesses, the demerged company would be well placed to create
substantial additional value for shareholders and rewarding careers for employees.”
BHP Billiton to enhance operating and capital productivity
BHP Billiton’s strategy will remain unchanged. It will continue to own and operate large,
long-life, low-cost, expandable, upstream assets diversified by commodity, geography and
market. It will remain committed to its solid A credit rating and seek to steadily increase or at
least maintain the dividend per share in US dollar terms at each half yearly payment
following the demerger, implying a higher payout ratio.
BHP Billiton has been simplifying its portfolio for over a decade and now has 41 assets
world-wide. The proposed demerger would be a significant step towards focusing the Group
on the 19 core Iron Ore, Copper, Coal, Petroleum and Potash assets that generated 96 per
cent of the Group’s Underlying EBIT in the 2014 financial year. It would not alter
BHP Billiton’s position as the largest exporter of metallurgical coal, a top three producer of
iron ore, a top four exporter of copper concentrate, the largest overseas investor in United
States shale and developer of the world’s best undeveloped potash resource in
Saskatchewan, Canada. With broad exposure to the steelmaking raw materials, copper,
energy and potentially agricultural markets, the Group is uniquely positioned to respond to
the changing patterns of commodities demand across economic cycles.
1
Represents planned annualised volume and cash cost productivity gains to be delivered from our
core assets only, relative to our FY14 baseline. Additional productivity-led gains are expected to be
generated by NewCo and our other non-core assets.
BHP Billiton’s minerals portfolio will ultimately be focused on six major operated assets:
Western Australia Iron Ore, Queensland Coal 2, New South Wales Energy Coal and
Olympic Dam copper in Australia; and the Escondida and Pampa Norte copper mines in
Chile. It is currently investing in a seventh asset in the Saskatchewan potash basin, Canada.
The Group also retains its non-operated interests in the world class Antamina copper (Peru),
Cerrejón energy coal (Colombia) and Samarco iron ore (Brazil) joint ventures.
Petroleum will concentrate on its high-quality assets in the United States and Australia which
include: operated facilities such as Pyrenees and Macedon in Western Australia, Shenzi in
the deep water Gulf of Mexico and Angostura offshore Trinidad, as well as shale resources in
the United States. BHP Billiton also retains its non-operated interests in Atlantis and Mad
Dog in the Gulf of Mexico, and Bass Strait and the North West Shelf offshore Australia, while
pursuing other high-value exploration and development opportunities.
In the 2014 financial year this core portfolio would have delivered an average Underlying
EBIT margin of 42 per cent 3. With a suite of development options in its core portfolio
expected to generate an average rate of return of greater than 20 per cent 4, BHP Billiton is
well placed to create significant shareholder value.
Beyond this proposal, BHP Billiton will continue to simplify and, as part of that process,
continues to review Nickel West, New Mexico Coal and 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.
A new global metals and mining company
The proposed demerger would create a new global metals and mining company that is well
positioned to create value for shareholders while benefiting its employees and their
communities.
The assets selected for NewCo include some of the most attractive operations in their
industries. Cannington (Australia) is the world’s largest producer of silver. The Manganese
business is the world’s largest producer of manganese ore with mines at GEMCO (Australia)
and Hotazel (South Africa) and a top global producer of alloy through its TEMCO (Australia)
and Metalloys (South Africa) assets. The Aluminium business includes one of the largest and
lowest cost global alumina refineries in Worsley (Australia), competitive smelters in Hillside
(South Africa) and Mozal (Mozambique) and a non-operated interest in bauxite, alumina and
aluminium assets in Brazil. Illawarra Coal (Australia) is a significant exporter of metallurgical
coal into the Pacific Basin and Energy Coal South Africa is the third largest South African
exporter of thermal coal. Cerro Matoso (Colombia) is a high-quality ferro-nickel operation.
This portfolio is cash flow positive today with assets competitively positioned in the first or
second quartile of their industry cost curves. In the 2014 financial year, its Underlying
2
Queensland Coal comprises the BHP Billiton Mitsubishi Alliance (BMA) asset, jointly operated with
Mitsubishi, and the BHP Billiton Mitsui Coal (BMC) asset operated by BHP Billiton.
3
Excludes third party trading activities.
4
Ungeared, post tax, nominal rate of return for our major project options considered in the five year
plan.
EBITDA margin was 21 per cent and over the last decade it generated robust earnings
through the cycle with an average Underlying EBITDA margin of 34 per cent. 5
NewCo will benefit from a dedicated Board and management team with a broad range of
mining, commercial, exploration and financial experience who will develop a strategy,
operating model and culture to further enhance the competitive position of its assets. By
tailoring its approach, and retaining elements of BHP Billiton’s common systems and
processes, it would be designed to operate safely, reduce overheads and deliver improved
performance. This would allow NewCo to increase earnings and cash flow even in the
absence of higher commodity prices.
Over the medium term, the company would be well placed to take advantage of the expected
improvement in its commodity markets as reflected in consensus estimates. Over time, it
would have the flexibility to consider a broader set of options, including low-risk brownfield
investment opportunities, as it develops a proven track record as a strong operator and
disciplined manager of capital.
On formation NewCo is expected to have a strong balance sheet with minimal net debt
(before finance leases). The company will target an investment grade credit rating and have
the flexibility to consider a dividend policy that reflects its cash generating capacity.
NewCo’s head office is expected to be in Perth, Australia, with its African operations and
global shared services centre managed from a regional head office in Johannesburg, South
Africa.
It would be committed to responsible environmental management, the safe operation of its
assets and to making a positive contribution to its host communities and nations.
BHP Billiton’s existing community commitments will be fulfilled, while NewCo would foster its
own partnerships and establish its own community programs.
Approximately 24,000 employees and contractors are employed at NewCo’s assets. Minimal
changes are expected for operational employees as a result of the demerger. Employees
who join NewCo would have similar employment conditions that honour existing contractual
obligations and all collective agreements would remain in place.
Structure, approvals and timing
BHP Billiton has a strong track record having delivered a total shareholder return of 394 per
cent 6 over the last decade, including dividends and share buybacks of US$64 billion 7. This
proposal would create a platform from which the Group can extend that record as it is
expected to unlock shareholder value by supporting a further improvement in the
performance of both BHP Billiton’s core assets and those chosen for separation.
BHP Billiton Limited and Plc shareholders would receive an in-specie distribution of shares in
the new listed company on a pro-rata basis, as well as retaining their existing shares in the
Group. In addition, BHP Billiton will seek to steadily increase or at least maintain the dividend
5
Manganese revenue and Underlying EBITDA is included on a proportional consolidation (60 per cent
interest) basis. Statutory reporting has historically been on a full consolidation basis and is expected
to change to equity accounting in H1 FY15.
6
BHP Billiton Plc total shareholder return (TSR) in US dollar terms from 30 June 2004 to 30 June
2014. BHP Billiton Limited TSR was 398 per cent over this period.
7
Over the period from FY05 to FY14 inclusive.
per share in US dollar terms at each half yearly payment following the demerger, implying a
higher payout ratio.
It is intended that NewCo would be an Australian incorporated company listed on the
Australian Securities Exchange and would have an inward secondary listing on the
Johannesburg Stock Exchange. It is also proposed that a sponsored, Level 1 American
Depositary Receipt (ADR) program would be established, with those ADRs traded in the
United States over-the-counter market.
In selecting this structure, the Board carefully considered a range of alternatives and believes
this proposal will deliver more value for shareholders than other options taking into account:
certainty of outcome; associated costs; the time to implement; risks associated with third
party approvals; and the requirement to treat all shareholders equally under the Group’s
dual-listed companies structure. In addition, this proposal provides shareholders with
investment choice and an opportunity to benefit from the potential value created by two
high-quality resources companies.
A final Board decision will only be made once the necessary government, taxation, regulatory
and other third party approvals are secured on satisfactory terms. Once the necessary
approvals are in place, shareholders will have the opportunity to vote on the proposed
demerger.
BHP Billiton will keep the market informed of relevant developments. Subject to final Board
approval to proceed, shareholder approval and the receipt of satisfactory third party
approvals, the demerger is expected to be completed in the first half of the 2015 calendar
year.
Sponsor: Merrill Lynch South Africa Proprietary Limited
Further information on BHP Billiton can be found at: www.bhpbilliton.com.
Disclaimer
No representation or warranty is made as to the accuracy, completeness or reliability of the
information in this release.
Nothing in this release should be construed as either an offer to sell or a solicitation of an offer to buy
or sell BHP Billiton securities or securities in NewCo in any jurisdiction, or be treated or relied upon as
a recommendation or advice by BHP Billiton.
This release contains forward looking statements, including statements regarding plans, strategies
and objectives of management, future performance and future opportunities. These forward looking
statements are not guarantees or predictions of future performance, and involve known and unknown
risks, uncertainties and other factors, many of which are beyond our control, and which may cause
actual results to differ materially from those expressed in the statements contained in this release.
BHP Billiton’s Annual Report on Form 20-F filed with the US Securities and Exchange Commission
identifies, under the heading Risk Factors, specific factors that may cause actual results to differ from
the forward-looking statements in this release. BHP Billiton does not undertake any obligation to
update or review any forward-looking statements.
No financial or investment advice – South Africa
BHP Billiton does not provide any financial or investment 'advice' as that term is defined in the South
African Financial Advisory and Intermediary Services Act, 37 of 2002, and we strongly recommend
that you seek professional advice.
UK Financial Services and Markets Act 2000 approval
The contents of this release, which have been prepared by and are the sole responsibility of
BHP Billiton, have been approved by Goldman Sachs International solely for the purposes of section
21 of the United Kingdom’s Financial Services and Markets Act 2000 (as amended). Goldman Sachs
International, which is authorised by the Prudential Regulation Authority and regulated by the Financial
Conduct Authority and the Prudential Regulation Authority in the United Kingdom, is acting for
BHP Billiton and no one else in connection with the proposed demerger of NewCo and will not be
responsible to anyone other than BHP Billiton for providing the protections afforded to clients of
Goldman Sachs International, or for giving advice in connection with the proposed demerger of
NewCo or any matter referred to herein.
Media Relations Investor Relations
Australia Australia
Emily Perry Tara Dines
Tel: +61 3 9609 2800 Mobile: +61 477 325 803 Tel: +61 3 9609 2222 Mobile: +61 499 249 005
email: Emily.Perry@bhpbilliton.com email: Tara.Dines@bhpbilliton.com
Paul Hitchins Jodie Phillips
Tel: + 61 3 9609 2592 Mobile: + 61 419 315 001 Tel: +61 3 9609 2069 Mobile: +61 418 710 516
email: Paul.Hitchins@bhpbilliton.com email: Jodie.Phillips@bhpbilliton.com
Eleanor Nichols United Kingdom and South Africa
Tel: +61 3 9609 2360 Mobile: +61 407 064 748
email: Eleanor.Nichols@bhpbilliton.com Jonathan Price
Tel: +44 20 7802 4131 Mobile: +44 7990 527 726
United Kingdom and Americas email: Jonathan.H.Price@bhpbilliton.com
Ruban Yogarajah Dean Simon
Tel: +44 20 7802 4033 Mobile: +44 7827 082 022 Tel: +44 20 7802 7461 Mobile: +44 7717 511 193
email: Ruban.Yogarajah@bhpbilliton.com email: Dean.Simon@bhpbilliton.com
Jennifer White Americas
Tel: +44 20 7802 7462 Mobile: +44 7827 253 764
email: Jennifer.White@bhpbilliton.com James Agar
Tel: +1 212 310 1421 Mobile: +1 347 882 3011
South Africa email: James.Agar@bhpbilliton.com
Lulu Letlape Joseph Suarez
Tel: +27 113 762 375 Mobile: +27 828 206 832 Tel: +1 212 310 1422 Mobile: +1 646 400 3803
email: Lulu.Letlape@bhpbilliton.com email: Joseph.Suarez@bhpbilliton.com
BHP Billiton Limited ABN 49 004 028 077 BHP Billiton Plc Registration number 3196209
Registered in Australia Registered in England and Wales
Registered Office: Level 16, 171 Collins Street Registered Office: Neathouse Place
Melbourne Victoria 3000 Australia London SW1V 1LH United Kingdom
Tel +61 1300 55 4757 Fax +61 3 9609 3015 Tel +44 20 7802 4000 Fax +44 20 7802 4111
Members of the BHP Billiton Group which is headquartered in Australia
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