BHP spinoff could be worth $12 billion

UPDATE: BHP shares hammered on demerger, profit miss

BHP Billiton (ASX:BHP) (LON:BLT) —the world’s largest mining group formed by one of the industry’s landmark mergers— has pursued a strategy of rightsizing and simplifying its business for over a decade.

Last week Friday the company said following a board meeting "demerger of a selection of assets" is the "preferred option".

The Melbourne-based company also restated its goal to make iron ore, copper, coal and petroleum the four pillars of the organization, "with potash as a potential fifth."

BHP spinoff could be worth $12 billion

BHP's Cannington underground silver-lead-zinc mine in north-west Queensland, could form part of spinoff company. Image: McNab

BHP's board expects to consider the demerger option when it reconvenes this week and could make an immediate announcement should "material decisions" be made.

BHP, listed on more than a dozen exchanges with a market value of $186 billion, could unload most its non-core units and create a new, listed company or sell those business off separately. BHP  has hived off assets worth more than $5 billion since January 2012.

Bloomberg reports a spinoff of the company's the unwanted assets including the aluminum, manganese and nickel businesses across Australia, South Africa and Colombia, the South African coal division and the Cannington lead and silver mine could fetch as much as $12 billion, according to a valuation from CLSA Asia-Pacific Markets:

Chief financial officer Graham Kerr may run the spinoff company from headquarters in Perth with a portfolio that includes BHP’s West Australian nickel unit and the Cannington mine, the Australian Financial Review reported on Friday.

The aluminum, manganese, nickel and thermal coal operations formed part of the former Billiton, but its contribution to the group earnings has fallen from almost 30% at the time of the merger to about 10% today.

BHP is also expected to announce annual profits of more than $13.6 billion, up from $10.9 billion in the prior year on Tuesday, thanks to record iron ore production, it's number one earner ahead of petroleum and copper.

Image of Cannington mine tailing project by McNab, construction and engineering firm.