BHP spin-off South32 valued at $9.1 billion on listing

18th May 2015, Comments 0 comments

BHP Billiton's spin-off mining company South32 debuted on the Australian Securities Exchange on Monday at the lower end of expectations, valued at about Aus$11.3 billion (US$9.1 billion).

Shareholders in the Anglo-Australian giant overwhelmingly approved the demerger to allow it to focus on its most profitable areas of iron ore, copper, petroleum, coal and potash.

The new entity, South32, has a more diversified metals and mining portfolio, including aluminium, coal, nickel, manganese, silver, lead and zinc with most of its mines in the southern hemisphere.

It began trading at 0200 GMT at Aus$2.13. Analysts had reportedly expected the company to range between Aus$2.0 and Aus$3.50 per share.

Shares in BHP tumbled 6.5 percent to Aus$30.39.

"In rough terms, it (BHP) is down by about $2.25 compared to the current price of South32 of $2.15," said CMC Markets chief market analyst Ric Spooner.

The new company's chief executive Graham Kerr said the listing came during "challenging times for the resources sector".

But he added: "South32 will start life with a strong balance sheet, along with high-quality, well maintained, cash generative assets and highly talented people."

South32, with gross assets worth US$26.7 billion, will also be listed in London and Johannesburg, with trading set to begin on those markets later Monday.

The new company is the world's largest producer of manganese ore and owns the largest silver mine in the world.

"We believe that our regional model will enable us to improve our productivity and performance in a sustainable way," said Kerr.

"We will aim to combine strong operational performance with financial discipline as we seek to increase shareholder value."

BHP announced the plan to create an independent spin-off company in August and the decision was approved by shareholders earlier this month.

South32's head office is in Perth and has a global workforce of about 27,000 people.

© 2015 AFP

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