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Johannesburg - The intention of BHP Billiton [JSE:BIL] to list some of its entities in a separate company and wave South Africa good bye, pushed the JSE’s resources sector almost 2% higher on Friday morning and gave the rest of the market a lift too.
The announcement in Melbourne that the world’s biggest mining group favoured the idea of listing its assets in aluminium, manganese and nickel in another company, was widely welcomed and the share price rose sharply in London and Johannesburg.
Apparently it is planning to also include BHP Billiton’s coal energy assets in such a company, which could be worth as much as $14bn.
This means that BHP Billiton will diminish its exposure to South Africa to virtually nothing, as most of these unwanted assets are based here.
These assets, particularly the aluminium assets, are battling to be profitable despite a controversial deal with Eskom which provides Alusaf, the mining giant’s aluminium subsidiary, with electricity at a price that is subsidised by the tax payer.
It has also been known for a long time that international mining groups’ market value is inhibited by exposure to South Africa, as political uncertainty about mining rights and a very volatile labour market is a deterrent for overseas investors.
If the separate listing continues, Anglo American will be the only international mining group with major exposure to South Africa, although Glencore [JSE:GLN] also has assets here.
By midday on Friday BHP Billiton’s share price was 2.9% higher on R365.39, but the share price traded at one stage as high R368.88.
Anglo American [JSE:AGL] also improved strongly by 1.53% to R282.25 and the result was that the resources index was at midday 1.95% higher than the day before.
At midday the All-share index gained 0.74%to 51 451 points and the Top 40 index strengthened by 0.85% to 46 309 points.
The financial index was only 0.15% higher and the industrial index was 0.44% better than Thursday.
BHP Billiton was the busiest share on the JSE in terms of value on Friday morning and by midday 1.34 million shares were traded at a total value of R491m.
The strong rise on Friday morning could, however, not make up for the losses of the past month and the share price was still 4.4% down compared to 30 days ago and 1% lower than seven days ago and 15.9% higher than twelve months ago.
BHP Billiton’s strong run also gave the London market a boost and enabled the FTSE-index to rise for the first time in four days, which gave the local market another boost.
The market in London and elsewhere in Europe is also supported by expectations that the poor economic data coming out of the eurozone will force the European central bank to announce another round of financial stimulus.
Wall St was higher on Thursday, fuelled by conciliatory comments from Russian President Vladimir Putin, which helped ease worries over the Ukrainian conflict.
- Fin24
