BHP Billiton rolls out an aluminium lifeline

WHEN aluminium was excluded from the four focus pillars identified by the world’s largest diversified mining company – BHP Billiton, it no doubt left thousands of employees at the Hillside and Mozal smelters in Richards Bay and Mozambique, uncertain about their future.

As with any global conglomerate, those on the ground were the last to hear on Friday of an impending move to create a new and independent global metals and mining company (NewCo).

But concerns about the implications of such a demerger for local smelter employees were short-lived on Tuesday when BHP Billiton formally announced that they would not be divesting from South Africa because they ‘believed’ in the country’s growth prospects.

Spinning off non-core assets into NewCo seemed to leave a sweet topping for South African investors.

BHP Billiton CEO, Andrew Mackenzie, said South Africa would gain a major mining company with strong South African heritage, leadership and significant South African ownership.

More than one-third of NewCo’s production would be in South Africa, including the local coal, manganese and aluminium assets.

The new company’s global shared services centre would be established in Johannesburg with a South African at the helm and is expected to create more than 200 high-quality jobs.

Separating the businesses via a demerger had the potential to unlock shareholder value while providing local investors with a significant new option.

Once simplified, BHP Billiton would be almost exclusively focused on its exceptionally large, long-life iron ore, copper, coal, petroleum and potash basins. Assets selected for NewCo include high-quality South African coal, manganese and aluminium operations as well as alumina, aluminium, coal, manganese and silver assets in Australia, Brazil, Columbia and Mozambique.

Assets chosen for the demerger would benefit from being part of a new company specifically designed to enhance their performance.

A secondary listing on the Johannesburg Stock Exchange reflects the importance of South Africa to the new company and BHP Billiton’s confidence in the country as a global centre for the resources industry.

Amid a volatile economy and labour unrests, the latest news can be seen as a bail-out for the local aluminium industry and following the decommissioning of Bayside, it is welcome news that Hillside’s short-medium term future is secure.