BHP Billiton Limited ADR (NYSE:BHP) Announces the Creation of A New Company Out Of Its Aluminum, Manganese, Zinc and Lead Assets.

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By Ross Schwartz on August 20, 2014 Energy & Solar

BHP Billiton Limited ADR (NYSE:BHP), the largest mining corporation in the world, recently disclosed that it would spin off some of its assets in a separate business worth $16 billion. Sources have it that the company will spin off its businesses that it acquired back in 2001 through a merger deal. BHP Billiton Limited ADR (NYSE:BHP) has taken this decision in order to focus more on its high yielding assets and operations.

The shares of the company plunged by 4.5 percent on the last trading day, August 19, 2014, when the company announced that it was keeping back the profits for a share buyback; the investors were expecting around $5 billion in dividends.

Andrew Mackenzie, the chief executive of the company, said that BHP Billiton Limited ADR (NYSE:BHP) will focus on four of its pillar, namely: Petroleum, coal, copper and iron ore, in order to boost the cash flow and returns. He further said that the company is deliberating as to whether it should keep potash as its fifth pillar or not.

These 5 pillars mentioned above were responsible for deriving around 96 percent of the total profits achieved by the company in the fiscal year 2014.

Mackenzie, during a call with the financers and investors, said that a demerger is the most logical step in order to boost the profits and returns.

Sources have it that the separate company will have aluminum, nickel, manganese, silver, zinc, lead, and Australian and South African coal assets.

The CEO announced that the separate company will not have the Nickel assets of BHP Billiton Limited ADR (NYSE:BHP) in the Western region of Australia. He further said that those assets will be sold through a separate sale process.

An analyst at CLSA said that the asset mix up that BHP Billiton Limited ADR (NYSE:BHP) has made is better than what the market researchers were predicting. The company has added its Cerro Matoso Nickel assets in the separate company instead of Australia based nickel assets. It is important to note here that Cerro Matoso assets are more profitable than the Australian nickel assets.

Moreover, Fidelity Global Industrials Fund’s portfolio manager, Christopher Moore, said that the company will perform even better now as it will have more profitable assets to focus on.

BHP Billiton Limited ADR (NYSE:BHP) announced that the company was successful in cutting back its costs by $2.9 billion in the 2014 fiscal year, and the company was confident that it will generate an additional $3.5 billion through cost cutting over the next 3- 4 years.

Although the shares of BHP Billiton Limited ADR (NYSE:BHP) fell down on the last trading day, August 19, 2014, most of the market analysts are of the view that it is nothing but an over-reaction of the investors as the company did not announce any special buybacks or dividends in its call with the investors.

Coming to the stocks of BHP Billiton Limited ADR (NYSE:BHP), the company, on the last trading day, August 19, opened its shares at a price of $70.29 and closed at a reduced price of $70.03. The company has a market capitalization of $189.98 billion with a price to earnings ratio of 12.55.