Mining giant BHP Billiton Limited (ASX: BHP) has increased talk regarding its proposed demerger, telling shareholders at its London AGM they would benefit from the next step in the company's "evolution".
The miner intends on spinning off a number of its non-core businesses and operations into a new entity, which is currently known as "NewCo". The demerger, which is still subject to regulatory approval and a shareholder vote, is designed to allow both entities to focus on their own growth paths, maximising productivity as well as minimising costs.
As it stands, BHP is aiming to grow overall production by 16% by the end of FY15, as well as achieving US$3.5 billion in annualised productivity gains. According to the News Ltd press, BHP's CEO Andrew Mackenzie said: "The demerger proposal is an important step forward to …strengthen your already financially strong company."
The assets that would be spun-off include some of its coal, manganese, aluminium, nickel and silver assets. The Nickel West business would be sold off separately, allowing the miner to focus on maximising shareholder returns from its four pillar divisions, being iron ore, coal, petroleum, and copper.
The company hopes that the demerger will be completed in the first half of the 2015 calendar year. The new company would be listed on the ASX, as well as the London and Johannesburg Stock Exchanges.
Buy, Hold, or Sell?
BHP Billiton remains one of my favourite mining companies due to its stronghold over the industry as well as its high level of diversification. But until the volatility facing the iron ore industry begins to subside, investors ought to remain on the sidelines and wait for an even more attractive opportunity. In the meantime, there are plenty of other great ways to profit handsomely from Australia's resources sector…
