Australia says changes to BHP Billiton corporate structure must fit national interest

Other shareholders may see the benefit of the suggestion to list the mining company’s oil and gas businesses on the New York Stock Exchange.

Elliott, which holds 4.1% of BHP’s London shares, sent the company a letter yesterday outlining a plan to unlock value and improve capital returns by around 50%.

The letter “places a spotlight on BHP’s USA onshore business and its place in the broader group”, said Alon Olsha, a mining analyst at Macquarie Group Ltd.in London.

BHP, which has two separate legal entities listed in Sydney and London that are run as one group, should unify into a single Australian-headquartered company, Elliott said in a statement.

As you might already be aware, BHP Billiton operates as a dual-listed structure.

BHP doesn’t agree with the assessment, saying the proposals’ “costs and associated risks … significantly outweigh any potential benefits”.

Elliott says it has engaged in talks with senior members of BHP’s management but hasn’t disclosed who.

Diversified miner Vedanta Resources Plc said on Tuesday refined zinc production at its India unit rose almost 40 percent in the fourth quarter, boosted by higher output at a mine in the state of Rajasthan in northwestern India.

Elliott said its plan would unlock shareholder value by unifying its dual listing structure, spinning off its United States oil arm and revising its capital return policy.

“We already value the United States (conventional and onshore) oil operations at premiums to listed peers”, Mr Fitzpatrick said.

But if the proposal was implemented, would offshore investors gain access to the premium BHP shares trade in Australia or would Australian investors end up seeing the shares trade at the discount BHP shares are accorded in London?

The miner opposed Elliott’s “formulaic approach” to capital management for the cyclical resources industry and said share buybacks needed to be weighed against strengthening the balance sheet, investing in growth or making additional dividend payments.

BHP Billiton says that its board of directors will consider further its detailed response to the proposal and will make a further announcement in due course.

“We believe global mining companies should be questioning the conventional diversified model in a new low-debt, shareholder returns focused world”, Mr Hissey wrote in a note to clients.

Ellliott’ s BHP demands are a mix of strategies it developed going after USA companies, such as Marathon Petroleum Corp MPC.N , as well as foreign targets, such as South Korea’s Samsung Electronics Co Ltd 005930.KS .

The ASX 200 index broke into new highs for the year finishing on its high yesterday in a sign of strength fuelled in part by a 4.6% rally in BHP.