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BHP pins hopes on spin-off South32

BHP pins hopes on spin-off South32South32, the firm BHP Billiton (ASX, NYSE:BHP) will finish branching out by midyear, is set to get off on its right foot as the assets included in its portfolio are among the mining giant’s best performing in the past six months.

According to figures unveiled Tuesday, the businesses bound for South32 generated US$5.04 billion worth of revenue and US$887 million of earnings before interest and tax over the six months to December 31.

The aluminum and manganese divisions are shining particularly bright, as they are expected to contribute $551 million, or just under 7% of BHP’s first-half earnings before interest and tax (EBIT), Reuters reports, compared with roughly 2.5% a year earlier.

Those businesses, alongside some of world’s top miners’ coal, manganese, nickel and silver assets, will be part of the new company’s key portfolio, which CEO Andrew Mackenzie expects to generate more value.

“The benefits exceed the costs of doing this transaction as you would expect, but equally, both companies will be able to generate more productivity than they would together,” Mackenzie reiterated Tuesday.

He added the proposed demerger would allow BHP to further improve its underlying payout ratio.

South32’s head office will be in Perth, with a regional head office and global shared services centre located in Johannesburg. While it would be an Australian incorporated company, South32 is intended to have a primary listing on the Australian Securities Exchange, a secondary listing on the Johannesburg Stock Exchange and a standard listing in London.

All of BHP shareholders will receive shares in South32 if the miner’s board and shareholders approve the demerger over the next four months.