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Nickel West in limbo

BHP Billiton's demerger plan was thought to be largely driven by the failure to sell Nickel West, but its omission from NewCo was perhaps the biggest surprise of yesterday's announcement.

The new entity will contain the Cerro Matoso nickel mine in Colombia, but not Nickel West, which was expected to be a centrepiece of NewCo.

Instead, BHP CEO Andrew Mackenzie said the company was continuing its review of the Nickel West business.

"The sale process continues and we believe that Nickel West is neither a good fit for BHP Billiton nor with NewCo," he said on a conference call yesterday.

"We think that the best outcome for Nickel West is for that business to be owned by an operation that is much more committed to the nickel business and we continue with the process of talking with buyers at the moment to see how we might actually sell that business, either all or in part, but it's not actually part of the long-term strategy of BHP Billiton, nor would it be appropriate, because of its maturity and some of its complexities, to put it into NewCo."

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BHP announces spin-off

BHP Billiton will demerge its aluminium, coal, manganese, nickel and silver assets into a new "independent global mining and metals company" to focus on its four pillars.

BHP said many of the assets within "NewCo" were the most competitive in their industries, including the Cerro Matoso nickel mine in Colombia, Energy Coal South Africa, Illawarra Coal, the Cannington silver-lead-zinc mine and the aluminium and nickel businesses.

However, the spin-off excludes the Nickel West assets, which BHP said it would continue to review.

Perth-based NewCo will have assets in five countries and be led by current BHP chief financial officer Graham Kerr.

BHP Copper president Peter Beaven will replace him, while current BHP head of group investor relations Brendan Harris will be CFO of NewCo.

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WA inquiry aims to shed light on FIFO suicides

THE Western Australian Parliament will launch an inquiry into fly-in, fly-out suicides after passing a motion from state Opposition leader Mark McGowan.

The Education and Health Standing Committee will outline its terms of reference today and produce a preliminary report by the end of the year.

Debating the motion late yesterday, both sides of politics supported the inquiry and said because of the pressing nature of the issue, a final report would be produced by March 2015.

"We could all see that this was a bipartisan issue and not one in which we would play politics," Liberal member for Eyre Graham Jacobs said.

"It is really important also that we recognise that we want to make a difference. A lot of us understand the issues.

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Newcrest posts $2.2B loss

DESPITE an improved operating performance, impairments on the Lihir mine and other assets have resulted in a $A2.2 billion full-year loss for Newcrest Mining.

The company posted a $5.7 billion loss for the 2013 financial year after write-downs.

As previously flagged, the company posted $2.35 billion of asset impairments on Lihir and Hidden Valley in Papua New Guinea, Telfer in Western Australia and Bonikro in Ivory Coast.

The underlying profit was $432 million, down from $446 million last year due to a lower gold price.

Free cash flow was $133 million, compared to net outflow of $1.4 billion for FY13.

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Letters to the Editor: Dryblower

YESTERDAY'S Dryblower about BHP Billiton's proposed demerger prompted a number of letters from readers.

Dear Dryblower

It has been amusing to read in the press that BHP's Spinco should be named Billiton and to share your cynicism on the role of management consultants from MBA land. However, an opportunity beckons in Spinco. For years now, when looking at exploration and development opportunity in Australia, most of us find ourselves considering opportunity generated by former Australian stalwarts such as WMC, CRA and MIM. It has been decades since there was such comprehensive exploration effort made in Australia by single companies, Rio and BHP have all but abandoned Australian exploration. Who will find the next Olympic Dam?

The great opportunity presented by Spinco is to recreate that culture and have a new Australian champion. Roy Woodall at Diggers lamented how WMC lost its way and became driven by the short term, this new entity with Australian nickel, silver-lead, coal, manganese and alumina, could with vision, become our industry leader, a genuine Australian diversified miner. Haddon King wrote a great collection of essays many years ago titled "the rocks speak". This is still the foundation of our industry. In Australia the rocks speak loudly but the big boys are no longer listening. As you note, management will be key and let's hope Spinco will be managed by true mining people who listen to the rocks rather than management consultants.

Given the company will be founded on WMC's nickel assets, why not call it WMC redux.

Regards,

Alistair Cowden

Spot on analysis of course.

You may also be reasonably sure that the management consultancy already has a draft of a 10-point presentation calling for BHP to move (back) into less-correlated commodities to smooth out the swings in BHP's results.

Rinse. Repeat.

Josh Clarke

Along a similar line of thought is the use of major contractors in the mining industry and particularly iron ore by BHP/BHP Billiton …

In the early 1990s BHP (and other major players) thought it a good idea to engage contractors (such as at the time "market darling" Henry and Walker and Roche Bros, etc) ostensibly because BHP itself was too fat and contractors were cheaper and much more efficient (and with little or no stated safety or IR problems). Part of this was that these organisations had only passing regard for these issues nor substantial internal expertise to deal with them. In effect, I guess this was a previous manifestation of "splitting"

Twenty years on these contractors were pretty bloated themselves but BHPB "buys" Leighton's mining division in the Pilbara which had existing contracts with BHPB. This turn-around was I believe, in part, to control IR and safety issues which had materialised and to generally have greater control as well as take advantage of economies of scale.

Ironically, Leighton had sucked up the mining contract division of HWE, which itself was a merged entity of the above mentioned Henry and Walker plus Eltin. Now all back in the BHPB fold. I'm sure a few management consultants had gainful employment along the way as well … I'll look forward to around 2025 for the next iteration!

Just thought this was interesting. Really enjoy your articles, Dryblower.

Declan Hoden

Agree entirely Dryblower. Ironic that BHP aims for a re-rating by spinning out many of the same assets that it acquired via the expensive merger with Billiton.

Gavin Wendt

This article is the reason I love Dryblower. Despite what might be seen to some as a cynical view, he quite often simply cuts through the hype, jargon and spin to present what is likely the kernel of truth.

Keep it coming.

Coogee Barbuzza

Letters to the editor are always welcome. Email editor@miningnews.net. Some letters may need to be edited.