Shareholders in BHP Billiton are scheduled for a vote later this week that could impact the entire mining industry according to aWall Street Journal
The shareholders will meet to decide if the company, the largest mining company in the world, should transition into a smaller, leaner company.
The Wall Street Journal reported that many mining companies are beginning to favor the smaller, more focused model than the large companies that formed through mergers during mining’s boom.
Glencore PLC intends to spin off its 23.9 percent stake in Lonmin, the world’s third-largest platinum producer and iron-ore-focused Brazilian mining company Vale SA said it was considering carving off a stake in its base-metals division to “unlock value.”
BHP’s plan goes further. It is setting up a company, South32, to house unwanted operations including coal mines and alumina refineries. In the process, it would halve the number of assets it runs and the number of continents on which it operates, leaving BHP focused on a handful of commodities including iron ore, copper and oil.
The measure could be one of the biggest breakups in mining history—and could prompt other large mining companies to follow suit, analysts say.
Part of BHP’s reasoning is that the value of some of its assets remains hidden within the $130 billion company it has become. In a smaller company, run by a dedicated management team, those assets are expected to have room to shine.
“For South32, the separation gives it the freedom to pursue its own tailored strategy…without having to compete with BHP Billiton’s larger assets and operations,” BHP Chief Executive Andrew Mackenzie said in March.