Shares of BHP Billiton Limited (ASX: BHP) have lost a further 74 cents or 2.2% of their value today, compared to a 0.7% decline by the benchmark S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO). The heavy decline came after the miner scrapped its plans to sell its Nickel West business, saying that a buyer hadn't come forward with an acceptable bid for the assets.
So What: The Nickel West business is not considered a core asset by BHP Billiton which instead wants to focus on its four pillar strategy going forward. This includes its iron ore, copper, coal and petroleum operations, with a possible addition of potash in the coming years.
In May, BHP Billiton stated that it was reviewing its options for the Nickel West business, hoping to take advantage of the strengthening nickel prices to offload it at a decent price. The miner had been hoping to sell it separate to other non-core assets and thus excluded it from its proposed spin-off which it hopes will proceed at some point in 2015.
As reported in The Australian Financial Review, Glencore and Chinese nickel major Jinchuan are believed to have tabled bids for the business, but both were considered far too low for BHP which had been hoping to maximise the value for shareholders. The business will unofficially remain up for sale and will not be bundled into the proposed demerger, currently known as 'NewCo'.
Now What: The failure to sell Nickel West is clearly a setback for BHP Billiton. Not only could the proceeds have been put towards paying down debt or improving shareholder returns, the miner is now also stuck with an environmental rehab bill estimated to be worth up to US$2 billion that is attached to the Nickel West business.
