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.”

It had been widely reported that a trade sale of the asset had failed, but Mackenzie said he remained confident there was a “natural owner” out there for the division.

“The reality is we’re trying to create simple companies that can be highly focused,” he said.

“But I do believe it can be a fit with different kinds of companies, companies that are run along lines that don’t have the sort of focal point of a BHP Billiton or a NewCo and we will continue with that process and we’ll continue to talk to interested parties.”

The company announced a formal review of the Nickel West business in May, which kicked off a bidding process.

Glencore confirmed it was one of the companies looking at the assets and the other bidders were reported to be China’s Jinchuan Group, Dutch commodity trader Trafigura, Mick Davis’ X2 Resources, Canadian nickel miner Sherritt International Corp and Melbourne-based MMG.

However, MMG boss Andrew Michelmore ruled out his company last month because of its focus on the newly acquired Las Bambas project in Peru and it has been reported that Glencore had backed away.

Canada’s First Quantum Minerals is another company that would be a likely and logical buyer of Nickel West.

The company, which has a $C14.3 billion market capitalisation, purchased BHP’s Ravensthorpe nickel operation for $US340 million in 2009.

Ravensthorpe was considered a spectacular failure for BHP, with the major spending $2.2 billion to build it before mothballing it only eight months later.

But First Quantum has since restarted the operation and turned it around, posting an operating profit of $41.2 million in the June quarter.

It is understood First Quantum co-founder and executive director Martin Rowley approached then-BHP CEO Marius Kloppers over Nickel West, but the company settled for Ravensthorpe instead.

Mackenzie refused to say how many parties BHP were talking to.

“This is a matter of commercial discussions with several potential partners or buyers and I don’t want to disclose that at this stage,” he said.

The Nickel West business comprises the Mt Keith, Cliffs and Leinster mines and associated concentrators, the Kalgoorlie smelter, Kambalda concentrator and the Kwinana refinery.

BHP is also hanging on to New Mexico Coal and some smaller petroleum assets, which remain under review and are likely to be divested.

Shares in BHP slumped by more than 4% this morning to $A38.065.