Banking on Fossil Fuels: BHP Billiton Mining For Non-Renewable Energy
Banking on Fossil Fuels: BHP Billiton Mining For Non-Renewable Energy
When researchers and ecologists were talking about global warming induced climate change, BHP Billiton the world's largest mining company is clearly not listening. The group will leave off its metals business as a separate unit in Australia. BHP Billiton is now focusing on core iron ore and (unfortunately) coal and oil.
When it comes to profits, BHP is not lagging behind with a full tear profit of 23% to $US 13.8 million or $A 15 billion. This is the 15th straight year when the mining company has struck gold with record iron-ore production. Chief Executive Andrew Mackenzie has emphasised that the group has delivered on its promises in the last 12 months and that “Our operational performance continued to improve, enabling us to exceed production guidance for a number of our core commodities including iron ore, metallurgical coal and petroleum liquids.”
A final dividend of 62 US cents per share will be paid up from 59 US cents per share one year back. But the BHP shares fell 3.6% when trading in London opened following release of the news that the corporate mining group was going the fossil fuel way. Given the limited future of the fossil fuel industry (both literally and metaphorically), BHP may not have banked on the right combination this time by chosing to go in for coal and oil along with iron-ore.
But the move to create an independent company from metallurgical coal as well as aluminium, manganese, silver and nickel assets has been viewed as a sound move by the company. Analysts hold that the planned demerger will release shareholder value through rationalisation the structure of the group.
The new entity is intended to reduce costs and improve productivity or so the spin doctors say. Meanwhile, the spin-off company is Perth based and it will be led by current board member of BHP David Crawford as chairman. The chief executive will be Graham Kerr who is currently heading finance in BHP.
Group chairman Jac Nasser has announced “For over a century, BHP Billiton has progressively reshaped its business to maintain its industry leadership. We believe the proposed demerger, if implemented, will accelerate the simplification of the group’s portfolio, provide investors with choice and unlock value in both companies. Our shareholders will have the opportunity to vote on this proposal once the necessary approvals are in place.”
The new entity will be called NewCo and its assets will include BHP's aluminum and manganese businesses apart from Cerror Matoso Nickel, Cannington Silver-Lead-Zinc mines, Illawarra Metallurgical Coal and Energy Coal South Africa.
Following this move, BHP shareholders are going to be entitled to 100% of the shares in NewCo on a pro-rata bass and the listing will be done on the Australian Securities Exchnage with a secondary listing on the Johannesburg Stock Exchange.
With BHP raising the stakes in the fossil fuel industry, the renewable energy sector will score soon given the impeding onslaught of global warming and climate change.
