BHP Billiton’s mooted spin-off is sometimes referred to as “NewCo”, which is a bit ironic, given that the stuff in CEO Andrew Mackenzie’s out-tray is mostly old Billiton assets acquired in the 2001 merger.

Why not just come clean and call the new entity New Billiton Co.

Also, MD doesn’t like the name NewCo much, partly because it is a hard word to rhyme when you are writing a limerick.

Nevertheless, you can’t knock a bloke for trying:

There once was a company called NewCo

With quite a few dents in its duco

Worth $14 billion in cash

It was marvellous trash

That Mackenzie turned into banknotes.

It’s conveniently poetic but perhaps a bit unfair to describe BHP’s non-core assets as trash, given that Deutsche Bank reckons the possible discards – aluminium, manganese and nickel, South African coal and the Cannington silver-lead-zinc mine – are worth roughly $US14 billion ($A14.9 billion).

But in the context of BHP Billiton, where the assets generate barely 5% of group earnings, they are more trash than treasure.

Also, given its second-tier nature, NewCo will appeal more to investors looking for a turnaround story.

Deutsche Bank considers there is a “strong argument” for a primary South African listing, given the scarcity value of liquid South African mining assets on the Johannesburg Stock Exchange.

“We think NewCo would be potentially three times the size of the next comparable asset, with a higher free float,” it said in a research note.

“The same applies for Australia, where there is a void in the mining mid-cap space.”

Wherever NewCo ends up, it is sure to revive bad memories from Australian BHP investors who ended up paying a 20% premium to Billiton shareholders in 2001 to take a large punt on southern Africa – a region that other big mining companies were then (and still are) in a hurry to get out of.

At the time, then BHP CEO Paul Anderson sold the deal on the premise that BHP needed to get bigger to compete for global capital against the likes of Rio Tinto and Anglo American.

The “big is better” mantra was in tune with the times, as miners – who’d become an investment backwater during the dot com craze – were desperately seeking size to become meaningful to global investors.

Cynics like MD always regarded the 2001 logic as more of a fashion statement than hard-nosed business decision.

In a rare moment of prescience, he commented at the time: “What is fashionable today might look dross a few years from now.”

Thirteen years down the track, most of the Billiton stuff is indeed being classified as “dross” as Mackenzie pursues BHP’s latest craze called “four pillars”, ie. iron ore, coal, copper and petroleum.

It only reinforces the belief that BHP, caught up in the quest for size and relevance, paid far too much for Billiton in what was supposed to be a merger of equals.

At present Mackenzie’s commercial logic looks a no-brainer with iron ore, petroleum and copper dominating earnings and BHP’s share market valuation.

Why not shovel off a few marginal South African assets and focus on the good bits, even if it does remind investors of yet another bungled investment?

There is the added free-kick of forcing the hand of Mick Davis if he’s serious about picking up assets that he once laboured over as Billiton’s chief financial officer.

But, as we’ve seen, fashions can change rapidly.

It seems unlikely but Pilbara iron ore might not always be a licence to print money, or maybe nickel and aluminium will stage miraculous price rallies.

What delicious irony if, in years to come, the value of NewCo was to exceed that of BHP?

Alongside nickel and manganese, etcetera, NewCo investors would be punting on an often overlooked asset in BHP Billiton – the Cannington silver-lead-zinc mine in Queensland.

Deutsche Bank points out that most of the speculated NewCo assets sit outside BHP’s four pillars and are short life, downstream and have limited expansion potential.

In contrast Cannington would be the “jewel” in NewCo’s crown, delivering earnings before interest and tax of more than $500 million per annum.

Admittedly it has just seven years of underground reserves, however, a prefeasibility study on a $500 million open cut mine is underway that may see first production in 2019 – a few years before the underground is due to finish, the bank said.

This 3 million tonne per annum plan would double mine life but extracting lower-grade resources via a bigger 6Mtpa pit could extend it to 25-plus years.

Cannington would certainly offer a nice carrot to NewCo investors if BHP was prepared to chuck out some of the good along with the unfashionable.