PERTH (miningweekly.com) – The board of mining major BHP Billiton has urged shareholders to approve the proposed demerger of South32, which will contain aluminium, coal, manganese, nickel and silver assets, worth an estimated $26-billion.

Speaking ahead of the shareholder vote on May 6, BHP CEO Andrew Mackenzie said on Tuesday that the simplification of BHP’s portfolio was the logical strategy to maximise the value of the company’s tier-one assets.

“The demerger will create a more focused portfolio of large-scale operated assets with a smaller geographic spread and a higher proportion of common characteristics. With a simplified portfolio, we intend to streamline our organisational model, further standardise our common systems and better leverage our technical expertise across our operations.”

BHP currently has interests in 41 assets, across 13 countries and six continents. The demerger would simplify BHP’s asset base, allowing the miner to focus on 19 assets across eight countries and three continents.

BHP’s focus would remain on its petroleum, copper, iron-ore, coal and potash assets, which collectively generated about 96% of the group’s underlying earnings before interest in 2014.

“The demerger will simplify BHP Billiton and has the potential to unlock shareholder value, while creating a new global diversified metals and mining company with a significant industry presence in each of its major commodities,” BHP chairperson Jac Nasser said.

“Following the demerger, BHP will remain one of the largest diversified global resource companies and its strategic priorities will not change. The demerger simplifies BHP Billiton and enables us to further focus on generating value from our core portfolio.”

Mackenzie noted that the demerger would also help to drive sustaining productivity improvements in BHP’s remaining assets, allowing the miner to deliver gains beyond the targeted $4-billion a year by the end of 2017.

With a simplified portfolio, BHP would streamline its organisational model and generate functional cost savings of some $100-million a year, with 90% of the savings achieved by the end of 2017. These savings would be in addition to the reduction in costs resulting from the removal of the South32 businesses.

The South32 business would have a head office in Perth, Australia, and a regional head office and global shared services center in Johannesburg, South Africa.

BHP was expecting to spend some $738-million as a one-off cost to implement the demerger, with a one-off $55-million restructuring costs also expected with implementing organisational changes required to achieve cost savings.

Eligible BHP shareholders were receiving one South32 share for every BHP share held.

“We are building a new company from the ground up. We will have competitive assets, significant reserve lives and financial strength. We will benefit from the best of BHP’s approach to productivity and will create a culture that empowers our people,” said South32 CEO-elect Graham Kerr.