BHP is backed by investors on split plans

SHARES in the world’s largest miner BHP Billiton rose as traders gave the thumbs up to its plan to spin off less profitable assets.

It proposes to zero in on iron ore, petroleum, copper and coal divisions, with potash potentially forming a fifth ‘pillar’ of the business. The plan – the result of a review by Goldman Sachs known as ‘Project River’ – would see BHP demerge aluminium, bauxite and nickel operations into a company worth around £12bn, as a ‘preferred option’.

BHP is expected to flesh out the detail next Tuesday alongside annual financial results. But confirmation that it is pressing ahead with ‘portfolio simplification’ sent shares up 10.5p to 2050p.

The assets BHP is proposing to split off contributed £5.6bn out of £39.5bn of revenue in 2013, but delivered 0.8pc of operating profit.

BHP gave clues to the division’s prospects with last year’s annual results, saying: ‘We expect overcapacity in the aluminium and nickel industries to persist.’

While the commodities it plans to keep are also subject to volatility, they are tightly tied to urbanisation in China and other developing economies.

‘We believe a portfolio focused on our major iron ore, copper, coal and petroleum assets would… generate stronger growth in cash flow and a superior return on investment,’ BHP said.

Miners have been cutting costs and selling assets after most of the big players were hit by rising costs and low commodity prices.

This cost a number of FTSe100 mining chiefs their jobs.

BHP’s Marius kloppers was replaced by andrew Mackenzie, anglo american boss Cynthia Carroll by Mark Cutifani and Rio Tinto’s Tom albanese by Sam Walsh.