BHP and AngloGold spin-offs will up pressure for disposal of underperforming assets

Analysts are split over whether the spin-offs unveiled by BHP Billiton and AngloGold Ashanti in the past month could mark the beginning of a broader industry trend, but agree they will see investors increase pressure on management to deal with underperforming assets, the Sydney Morning Herald reports.

BHP and AngloGold’s rationales for their spin-offs are very different, but both will go some way to addressing a “South African discount” on their assets, analysts say.

Credit Suisse analyst Paul McTaggart says if BHP's $US15 billion spin-off is a success on listing next year, pressure will increase on companies to review their non-core, or unwanted, assets and run trade sales.

“It will depend on the success of BHP’s Newco,” he said.

“If Newco goes well, shareholders in others (miners) will be badgering the parents going ‘why don't you get rid of some of those underperforming assets’.”

Workers sacked over ice bucket challenge

The West Australian reports that BHP Billiton sacked three workers over the ice-bucket challenge internet craze last week.

The workers were dismissed from Mt Whaleback mine near Newman on Wednesday for breaching safety regulations and for misusing company equipment after using two onsite hiab cranes to lift a wheelie bin containing about 100 litres of water and ice over a worker's head.

The bucket was then tipped over the man, in line with the charity fundraiser that is sweeping the globe.

Eskom propped up

South Africa’s government has approved a support package for troubled state-run power utility Eskom.

According to Reuters this involves the company raising more than $4 billion in additional debt and receiving an equity injection from the government.

Eskom provides virtually all the electricity to South Africa. However, its costs are running ahead of its revenues, giving it massive funding issues.

Power constraints have been cited as a major reason for South Africa’s sluggish economic growth, hence the government’s interest in throwing Eskom a lifeline.

Reuters also reported that Eskom has announced the first unit of its coal-fired Medupi plant would link with the grid on December 24.

The big bang

It appears Indian Prime Minister Narendra Modi’s honeymoon is running out with international businesses getting frustrated with the dearth of reforms being undertaken during the first four months of his term.

No more widely is this felt than in the mining sector.

A report in the Financial Times says mining remains a no-go area.

The paper says companies such as Rio Tinto are keen to get among India’s vast coal reserves but amid the “Coalgate” scandal over the allocation of mining rights, foreign investors would be reluctant to enter even if Modi opened the door.

“There isn’t the space for international miners to make a return,” the FT quotes one global group CEO as saying.

“And frankly, you’d be a bit crazy to think about going into India even if they did change the rules given all the legacy problems in the sector.”