Mining giant BHP Billiton (ASX: BHP) is reportedly planning to set up a separate company for its aluminium, bauxite and nickel assets for the firm to focus on its core businesses.
Estimates of the new company's value range from $11 billion to $20 billion.
In response to the speculation, BHP said in a statement released on Tuesday, "We continue to actively study the next phase of simplification, including structural options, but will only pursue options that maximise value for BHP Billiton shareholders. Any course of action remains subject to detailed review and an assessment of alternatives."
It said a portfolio focused on iron ore, copper, coal and energy assets would keep the benefits of diversification, bring stronger growth in free cash flow and better return on investment. The four commodities are considered the four pillars of BHP, while potash could possibly its fifth pillar.
There is buzz in the business community that BHP, which has a market value of £106 billion, has consulted with banks about the planned demerger. Despite being the largest mining company in the world, BHP, under new Chief Executive Andrew Mackenzie, is cutting costs and selling non-core assets as it aims to focus on its core businesses.
He took over Marius Kloppers in early 2013 and cut the miner's capital spending from its peak of $22 billion, resulting in a 5.9 per cent increase in its revenues in the last six months of 2013.
The Telegraph reported that a possible demerger would not alter BHP's current listing structure in Australia and UK.
However, CMC Markets chief market strategist Michael McCarthy disagreed with the reported demerger because it would boost cost and possibly detract from shareholder value.
Mr McCarthy said, quoted by Brisbane Times, "My view would be that Mackenzie is making a mistake with this four pillars policy when really the strength of BHP in the last few years with commodities out of favour has been its diversified portfolio."