BHP Billiton Ltd. (BHP), the world’s biggest mining company, is holding talks for the sale of all or part of its Australian nickel unit as prices rose to two-year highs.
“The review is considering all options for the long-term future of Nickel West, including the potential sale of all or parts of the business, Melbourne-based BHP said today in an e-mailed statement. Talks with interested parties have begun, spokeswoman Eleanor Nichols said by phone.
The sale announcement comes as nickel surged 10 percent in the past week and follows comments from BHP Chief Executive Officer Andrew Mackenzie that he wants to run a smaller collection of assets. Glencore Xstrata Plc (GLEN), the global commodities trading and mining group, said in March it was assessing a bid for the assets, which could fetch about $800 million according to a report by RBC Capital Markets.
‘‘For BHP, it’s something that doesn’t move the needle any more,” Chris Drew, an analyst in Sydney with RBC, said today. “The overall size of the business means it’s not material enough for them to justify maintaining or potentially putting capital into, so it’s better off in someone else’s hands.”
BHP rose 0.9 percent to A$38.30 at the close of Sydney trading. The announcement follows the suspension of mining at the Perseverance underground mine because of safety concerns in December, the company said.
BHP was the fifth-biggest producer of refined nickel last year, according to London-based metals, mining and fertilizer company CRU.
BHP’s review of Nickel West comes after prices for the stainless steel raw material rose to a two-year high this week as supply tightened. Indonesia, the biggest nickel ore miner, banned exports in January. Russia, the second-biggest producer of refined nickel, continues to be threatened with sanctions after its interventions in Ukraine.
Prices have gained 10 percent in the past week after Vale SA suspended its nickel operations on the South Pacific island of New Caledonia following a contaminants spill, adding to supply concerns. The price dropped 1.3 percent to $20,720 a ton today.
BHP last year garnered 85 percent of its sales from its iron ore, copper, coal and petroleum projects. Focusing on those commodities will boost returns and free cash flow growth, the company said last month.
The company’s profit margin from its aluminum, manganese and nickel unit was 1.8 percent in the 12 months ended June 2013, down from 41 percent in 2007, according to company filings. That’s based on earnings before net finance costs, taxes and one-time items, a gauge that BHP calls its key measure of performance.
BHP has sold $3.3 billion of assets including uranium and diamond mines in the past two years, according to data compiled by Bloomberg. It got $650 million for its Pinto Valley copper project in the U.S., almost double JPMorgan Chase & Co.’s estimate of its value.
The company booked impairment charges on the Nickel West assets of almost $1.6 billion in the past two fiscal years after prices for the metal fell. The operations produced 103,300 metric tons in fiscal 2013. The unit includes the Mt Keith, Cliffs and Leinster mines and concentrators, the Kalgoorlie smelter, Kambalda concentrator and the Kwinana refinery.
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