JOHANNESBURG (miningweekly.com) – The demerging of a selection of BHP Billiton assets into a separate new company (Newco) was going according to plan and heading for a May vote, Newco CEO-elect Graham Kerr said on Monday.

Responding to Mining Weekly Online during question time at a media conference on BHP Billiton selling its South African Bayside aluminium casthouse to black economic-empowerment consortium Isizinda Aluminium as part of a R10-billion, five-year agreement involving JSE-listed aluminium semis fabricator Hulamin, Kerr said demerger progress was being made on the regulatory, shareholder and employee fronts (also see the attached video).

“It’s progressing very, very well. We’re getting the approvals we need both in Australia and in South Africa and in other jurisdictions.

“Engagement with key stakeholders, employees and shareholders is going very positively.

“We’re on track at this stage to produce documentation to go to our shareholders in March and we’ll look to have the vote occur in May,” Kerr told Mining Weekly Online.

The starting position of the still-to-be-named Newco was that it would have a primary listing in Australia and secondary inward listing in South Africa.

“What we found during our August results presentation was a lot of demand for our shares in the UK and now the company will also have a listing in the UK as well,” Kerr added.

On interest being shown by mining companies to acquire the Newco assets ahead of the listing, Kerr said the ongoing interest being shown in the assets was not changing the company’s demerger plans.

“These assets are attractive. We have the world’s largest silver mine and the best manganese business by a mile,” Kerr told Mining Weekly Online.

Cannington of Australia, the world’s largest silver mine, which produced 25.2-million ounces in the 2014 financial year, when it generated a return of more than 150% – “ a truly unique asset”.

The manganese business selected for demerging has mines at Hotazel in South Africa and Gemco in Australia, and smelters at Temco in Australia and Metalloys in South Africa.

With those assets, Newco would be one of the largest low-cost producers of manganese ore and a top global producer of manganese alloy.

“If you look at where they are positioned on the cost curve, most of these assets are first or second quartile, so you should expect to hear noise that people would like to buy these assets because they are high-quality assets,” Kerr added to Mining Weekly Online.

In aluminium, Newco takes in the Worsley alumina refinery in Australia and the Hillside and Mozal smelters in Southern Africa, with South African Mike Fraser (see picture) appointed Newco president and COO-elect Africa, using Johannesburg as the regional base.

Also part of Newco is Becsa Energy Coal, South Africa’s third-largest exporter of energy coal, with export sales of 13.3-million tons in the 2014 financial year and potential for growth.

In the mix, too, are Cerro Matoso Nickel of Colombia, which produces more than 40 000 t of contained nickel a year at a 49% return, and Illawarra Metallurgical Coal of Australia, which operates three underground mines that produce nine-million tons of coking coal a year.

The modern Worsley refinery has a capacity of 5.2-million tons of alumina a year and the Southern African aluminium smelters a combined capacity of 1.3-million tons a year.

In the last ten years, Newco’s portfolio has generated about half of its earnings before interest, taxation, depreciation and amortisation in Australia and a third in Southern Africa.

Speaking at an investor and analyst briefing in Sydney, BHP Billiton CEO Andrew Mackenzie described the demerger is an important step for BHP Billiton, which would create a new company of global significance.

“We remain on track to complete the demerger in the first half of 2015,” Mackenzie said in announcing that Ricus Grimbeek had been appointed Newco’s president and COO-elect Australia and would be based in Perth as the counterpart of Fraser, BHP Billiton’s current human resources president, who has worked the group’s coal, aluminium and manganese assets and is a former Mozal aluminium asset president.

“We’re building a new company from the ground up and the process of establishing our regional operating model and leadership team is progressing to plan,” Kerr commented.

Opportunity exists to reduce the overheads and boost the productivity of Newco’s 12 selected assets.

BHP Billiton plc and BHP Billiton Limited shareholders will be entitled to 100% of the shares in the new company through a pro-rata in-specie distribution.

Shareholders will retain their shares in BHP Billiton and the group will not re-base its dividend as a result of the demerger, implying a higher payout ratio.

Newco will have the flexibility to consider a dividend policy that reflects its cash generating capacity.

David Crawford, who will chair Newco, will have South Africans Keith Rumble and Xolani Mkhwanazi on his board and provide full demerger details by March.