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BHP Billiton Limited to sell nickel assets: Is today the time to buy?

Mining giant BHP Billiton Limited (ASX: BHP) has hired Goldman Sachs to sell its Nickel West division – a move which highlights the company’s seriousness about offloading its underperforming assets.

Although the mine booked a $151 million loss in the first half of this year (the miner has booked impairment charges of almost US$1.6 billion on the assets in the last two years), it has still received significant attention from parties such as Glencore Xstrata and X2 Resources which are both looking for ways to reduce costs and improve productivity. Canada’s First Quantum Resources, which bought BHP’s Ravensthorpe nickel mine in 2009, is also in contention to acquire the assets while Australian-based Western Areas Ltd (ASX: WSA) has also been cited as expressing interest (although they are unlikely to have the capacity to support such a big acquisition).

While X2 has reportedly considered an offer worth less than $1 billion, Glencore appears to be the more appropriate party given that its Minara unit controls the nearby Murrin Murrin mining and refining project. Despite the fact that it very recently booked an impairment charge of US$454 million on the Murrin Murrin project, Glencore’s CEO and largest shareholder Ivan Glasenburg said: “We will kick the tyres… (acquiring Nickel West is) something that would make sense but it is an asset that’s had problems.”

The price of nickel has remained depressed in recent years but has been slowly improving thanks to the Indonesian ban on the exports of unprocessed ore and is now sitting at around US$7 per pound. Although a number of analysts predict that the ban could be short-lived, the elevated price of the commodity will help boost BHP’s sale prospects.

Foolish takeaway

A sale of the assets would be good news for BHP shareholders in that it will allow it to increase its focus on more profitable divisions (such as iron ore, copper, coal or petroleum) while also freeing up a significant amount of capital which would allow for greater shareholder returns. BHP’s shares have fallen nearly 3% today, which could be a good opportunity to pick up a position in the miner.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

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