BHP spin-off South32 valued at US$9.1 bil.


SYDNEY–BHP Billiton’s spin-off mining company South32 debuted on the Australian Securities Exchange Monday at the lower end of expectations, valued at about AU$11.3 billion (US$9.1 billion), but its chief said it offered long-term value. Shareholders in the Anglo-Australian giant overwhelmingly approved the demerger earlier this month to allow it to focus on its most profitable areas of iron ore, copper, petroleum, coal and potash. The new entity, South32, has a more diversified metals and mining portfolio, including aluminum, coal, nickel, manganese, silver, lead and zinc, with most of its mines in the Southern Hemisphere. It began trading at 0200 GMT at AU$2.13 and closed at AU$2.05. Analysts had expected the price to range between AU$2.0 and AU$3.50. ��The BHP spin-off South32 has come on softer than expected,�� said CMC Markets sales trader Tony Kwok, adding that it was in line with the overall tone of the market. Shares in BHP tumbled 7.3 percent to end the day at AU$30.13, down AU$2.36. Overall the S&P/ASX200 fell on the sell-off of banking and other stocks, dropping 1.33 percent to 5,659.2. South32’s chief executive Graham Kerr said in a statement the listing came during ��challenging times for the resources sector.��

But he added: ��South32 will start life with a strong balance sheet, along with high-quality, well-maintained, cash-generative assets and highly talented people.�� Speaking to reporters in Perth, Kerr would not comment on the listing price for the new company which is the world’s largest producer of manganese ore and owns the largest silver mine in the world, but said the firm offered long-term value. ��We’ve spent a lot of time talking to investors about why we think South32 is a good investment and in the end they will make up their own mind and the share price will reflect that,�� he said. Kerr said he was looking to improve productivity in a sustainable way and combine strong operational performance with financial discipline to increase shareholder value. But investors appeared to have concerns about the spin-off’s growth potential, particularly given worries about weaker Chinese demand, despite the fact the new firm has relatively low debt levels. BHP in August announced the plan to create an independent spin-off company by separating various assets, and the decision was approved by shareholders earlier this month. ��Given the mix of commodities in the South32 vehicle we’re not expecting it to catch fire anytime soon,�� said CMC Markets chief market strategist Michael McCarthy. ��At the same time it’s been done at a time when valuations in these industries are quite low so it should hold the value in its share price quite well.�� South32’s head office is in Perth and the company has a global workforce of about 27,000 people. BHP shareholders received one South32 share for each one they held in the global miner. South32 was also to begin trading in Johannesburg and London on Monday.