Iron Ore Mining
A miner holds a lump of iron ore at a mine located in the Pilbara region of Western Australia in this December 2, 2013 file photo. World no. 2 iron ore miner Rio Tinto said on July 16, 2014 expansion work at its mines and productivity gains led to a sharp rise in iron ore output as it steps up shipments to Chinese steel mills. Picture taken December 2, 2013. REUTERS/David Gray/Files

BHP Billiton (ASX: BHP) will open a new spin-off company worth $15 billion, with headquarters in Perth. It would be one of the largest publicly listed companies in the Australian Stock Exchange (ASX) based in Perth according to market capitalisation.

It joins the ranks of Wesfarmers, capitalised at $49.8 billion; Woodside Petroleum, with a capital of $35 billion; and Fortescue Metal Group, with a $14 billion capital.

The firm will take charge of BHP's nickel, manganese, alumina and aluminium assets. Its selection of Perth as site of its headquarters is expected to boost business confidence in the city which suffered job cuts in 2013 as miners reduced costs in response to weaker commodity prices, said Cathryn Carver, managing director for international and institutional banking of ANZ, based also in Perth.

These assets are considered unwanted by BHP because they contribute little to the company's earnings. By its demerger, BHP would generate stronger growth in cash flow and log superior return on investment.

Besides axing jobs, Perth-based firms such as Woodside also shelved plans to develop the Browse project near Broom.

Carver pointed to Perth's proximity to the lucrative Asian market as one of the reasons why the city is a good place to set up corporate offices as well as being close to major Australian cities of Sydney and Melbourne.

Mark Barnaba, chairman of Macquarie Group WA, said the decision is a logical one since BHP's assets are Australian and Southern African, and Perth is considered a centre for resources, plus well-established infrastructure and all the supply chain of service providers needed by the resources industry.

YouTube/Z Media