BHP May Sell South African Coal Unit After Potash Deal, Deutsche Bank Says

BHP Billiton Ltd., the largest mine operator, may sell as much as $33 billion of coal and aluminum assets in South Africa, the U.S. and Canada, if a bid for Potash Corp. of Saskatchewan Inc. succeeds, Deutsche Bank AG said.

“The sale of smaller assets would simplify the group’s asset portfolio once more, and allow management to focus their energies on core divisions,” Paul Young, an analyst at Deutsche Bank, wrote yesterday in a research report.

The assets may include aluminum, coal and mineral sands resources in South Africa, leaving only the company’s manganese operations in the country, according to the report. BHP may also sell its two U.S. coal mines, its Nickel West unit, the Ekati diamond mines in Canada and Potash Corp.’s nitrogen and phosphate assets, Deutsche Bank said. That would cut debt to below $10 billion and improve the group’s earnings-before- interest-and-tax margin by as much as 7 percent, it said.

With 30 million metric tons of annual output, BHP is one of the largest producers and exporters of thermal coal in South Africa, where the ruling African National Congress has been debating the possibility of mine nationalization. The company owns the Hillside and Bayside smelters in Richards Bay on the east coast and has a 37 percent interest in nearby Richards Bay Minerals Ltd., a titanium venture with Rio Tinto Group.

BHP has offered $40 billion in cash, or $130 a share, to buy Potash Corp., which rejected the offer. Ruban Yogarajah, a London-based BHP spokesman, declined to comment on the report.

The company agreed this year to a review of power-supply prices charged by South Africa’s Eskom Holdings Ltd. to its aluminum smelters as losses by the state-run utility threaten supplies in the region. A new accord “may involve BHP Billiton assuming responsibility for the commodity pricing and currency- exchange risks related to the contracts,” BHP said in April.