BHP Billiton sets scene for mining disposals as commodity boom ends

A proposed spin-off by BHP Billiton of about US$15 billion in assets signals the start of a new round of disposals as the mining giants adapt to the end of a boom for commodities.

With Anglo American fielding offers on a weekly basis for mines and Rio Tinto Group last month dumping Mozambique coal assets for a fraction of what it paid three years ago, producers are streamlining in the wake of China-led mineral demand that drove record profits as metal prices soared.

Miners have been sharpening portfolios as commodity prices retreat and after poorly timed acquisitions in a decade-long US$616 billion investment spree led to asset write-downs and management clear-outs. BHP rose the most in seven months in London trading after saying it favoured a plan to divest some of its operations and might announce details this week.

"The fact that this has been so positively received clearly will have an impact on the way the other miners evaluate the options for disposal of rump assets," said Paul Gait, mining analyst at Sanford C. Bernstein. The announcement symbolised "the end of the super-cycle and the beginning of a more normal cycle", he said.

BHP's drive to simplify its business to four main products of iron ore, petroleum, coal and copper by spinning off smaller assets shows a way forward for competitors.

Anglo American and Rio were the most likely to follow BHP in spinning off assets, Gait said. Anglo's nickel assets and some of its copper mines could be removed, while Rio could dust off earlier plans to sell aluminium and diamond businesses and its iron ore operations in Canada, he added.