The exclusion of Nickel West from BHP Billiton Limited's (ASX: BHP) proposed demerger last month came as something of a surprise, but the business still appears to be gaining interest from a number of parties.
It is understood that mid-tier and junior players including Independence Group NL (ASX: IGO), Mincor Resources NL (ASX: MCR) and Panoramic Resources Ltd (ASX: PAN) are interested in joining forces to acquire the individual Kambalda concentrator asset included in the business. This is because they all currently use it.
However, it is believed that BHP would prefer to sell the business as a whole, which would seemingly put resources giants Glencore and Jinchuan Group in the lead in the race for the assets. As reported by The Australian Financial Review, Glencore is said to have issued a formal offer for the business valuing it at $200 million in addition to a commitment to assume up to $2 billion worth of environmental liabilities.
Why is BHP selling Nickel West?
Under the leadership of Andrew Mackenzie, BHP is focused solely on its four pillars which include iron ore, copper, coal and petroleum, along with potash which could soon become a fifth pillar. In an effort to remove costs, maximise productivity and increase capital, it is ridding itself of assets that it considers to be non-core, including Nickel West.
While this strategy should help the company maximise shareholder returns in the coming years, now doesn't seem like the best time to buy the miner. With iron ore prices falling heavily, I expect BHP shareholders could endure more pain before conditions begin to improve again. As such, I believe investors should remain on the sidelines, for now.
