BHP May Review Nickel, Aluminum Operations, Deutsche Bank Says
BHP Billiton Ltd., the world’s biggest mining company, may study its nickel, aluminum and alumina businesses after announcing a review of diamond operations, Deutsche Bank AG analysts said.
BHP may raise as much as $10 billion from disposing of assets, should the reviews lead to sales, Grant Sporre, Tim Clark and Rob Clifford wrote in a report dated yesterday.
“We expect this marks the start of a number of reviews of commodities/assets that also lack significant ‘scalability’ or size,” the analysts said. “We include in this category BHP’s remaining nickel assets, lacks scalability from resource constraint, and its aluminum/alumina assets, lacks scalability from power constraints.”
BHP yesterday said it may sell some or all of its diamond business as the operations have limited growth and may no longer fit its strategy. Melbourne-based BHP (BHP) could raise $5 billion to $10 billion from the sale of smaller assets to help fund expansions, Deutsche Bank estimated in the report.
BHP may also study the sale of its 50 percent stake in the Richard’s Bay titanium dioxide venture and the disposal of its manganese unit which could be combined with its nickel assets, Deutsche Bank said.
“We remain committed to diversification by commodity, geography and customer and having the portfolio that exposes to the different phases of the urbanization and industrialization process,” Ruban Yogarajah, a London-based spokesman for BHP, said today by phone. He declined to comment on specific assets.
BHP owns 80 percent of the Ekati diamond mine in Canada’s Northwest Territories and 51 percent of the Chidliak exploration venture in the territory of Nunavut, it said yesterday in a statement. The Ekati stake is valued at $2.7 billion by BMO Capital Markets using a 10 percent discount rate.
Deutsche Bank values Ekati at $1.7 billion and said Rio Tinto Group (RIO) may be interested in BHP’s diamond unit. De Beers (AAL) may face antitrust issues, preventing it from acquiring Ekati, it said.
“We also expect possible interest from parties keen to enter a lucrative, but tightly controlled market,” Deutsche Bank said.
To contact the reporter on this story: Jesse Riseborough in London at jriseborough@bloomberg.net
To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net
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