BHP spin-off plans met with skepticism
The world's largest miner BHP Billiton (ASX, NYSE: BHP) (LON: BLT) said Tuesday it's considering spinning off its nickel, manganese, and aluminum businesses into a separate unit.
With the exception of nickel which has received a boost from Indonesia's ore export ban, these are not exactly the most exciting commodities at the moment and their prices reflect that.
Following the exit from the steel industry more than a decade ago, its recent sale of the diamond business for $550 million and offloading uranium assets to Canada's Cameco, the strategy makes sense.
But putting a valuation of $19 billion on these out-of-favour raw materials may be a bit overoptimistic.
Particularly given the forecast that nickel, manganese, and aluminum will contribute less than $100 million to BHP's pre-tax earnings this year, expected to come in at $25 billion.
The Financial Times' Lex column discusses the prospects for BHP's simplification process below: