BHP to sell manganese assets

BHP Billiton, Anglo-American in talks on sale of jointly owned portfolio of manganese assets.

BHP Billiton (BHP) and Anglo-American are in talks to sell their jointly owned portfolio of manganese assets in South Africa and Australia, according to people familiar with the matter. 

The assets include two mines in South Africa, one in Australia, and processing plants in both countries. BHP owns 60% and Anglo 40% of the operations. Macquarie analyst Jeff Largey values Anglo's share of the manganese portfolio at $US530 million ($561m), which implies a full value of $US1.33 billion. 

Manganese is a key alloy ingredient in the production of stainless steel, and although its prices are down around 20 per cent since 2011, they've recently stabilised. However, for mega-miners, it is a only niche business. Global trade in manganese totals around $US3bn a year, 2.5% of the equivalent figure for iron ore. 

After a wave of overinvestment resulting in more than $US100bn in writedowns, major mining companies are shedding outfits that produce minerals mined in smaller quantities such as diamonds, uranium, platinum and manganese. 

At the same time, there are now buyers for these smaller mines: investment funds that have raised billions, led by industry veterans such as Mick Davis, former chief executive of Xstrata, and Aaron Regent, the former CEO of Barrick Gold. A spokesman for Mr Davis said his X2 Resources has money to invest and is looking at "all opportunities." Mr Regent declined to comment. It is not clear how much money, if any, Mr Regent has raised. 

Both BHP and Anglo recently saw the arrival of new chief executives who are under pressure from shareholders to cut costs and streamline their assets, to focus on their massive mines that produce essential commodities like iron ore, copper and coal. 

Earlier this year, BHP said that "simplification of our portfolio is a priority and is something we have pursued for several years". That followed a report in The Australian Financial Review that BHP leaders were looking at spinning off noncore assets worth around $18.5 billion. 

"We continue to actively study the next phase of simplification, including structural options, but we will only pursue options that maximise value for BHP Billiton shareholders," the company said in a statement. 

BHP, the world's largest mining company, in recent years has sold its Pinto Valley copper mining operation and associated railroad business to Capstone Mining Corp. for $US650m, and 15% in its Australian iron ore mine, Jimblebar, to Japan's Itochu and Mitsui for $US1.5bn. BHP also sold its Yeelirrie uranium deposit in Western Australia to Cameco for $US430m, and its diamond business to Dominion Diamond for $US553m. 

Mark Cutifani, who took over as CEO of Anglo last year, has said he wants to explore the selling some of the company's smaller and less-profitable divisions. On Monday, Anglo American Platinum, of which Anglo-American is the largest shareholder, said it would sell its Rustenberg and Union platinum mines in South Africa.


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