UK-Australian resources firm BHP is likely to spin out its thermal and lower-grade coking coal assets into a new firm, similar to the formation of South32 in 2015.
BHP has been trying to sell its thermal coal operations for several years and added its lower grade coking coal assets in August, setting a two-year deadline for divesting them. By doing so, BHP has created an entity that could support a standalone company by combining the Hunter Valley thermal coal assets and the BHP Mitsui (BMC) Queensland coking coal assets.
The company has not taken a trade sale off the table, but would need to sell everything on offer or risk being left with too small a group of assets to create a new firm. It is most likely to instead pursue an in-specie distribution of shares in the new company to existing shareholders in around 18 months' time, according to Glynn Lawcock, analyst at Swiss bank UBS.
That echoes the 2015 creation of South32, which BHP span off to hold non-core assets including some metals operations and its Illawarra metallurgical coal business.
Fellow UK-Australian firm Rio Tinto sold its thermal and coking coal assets in 2017-18, timing its exit from coal well, Lawcock said. But other producers, including BHP, UK-South African mining firm Anglo American and Switzerland-based trading and mining firm Glencore, are likely to struggle to find buyers as they look to exit or review their coal position.
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