BHP spin-off South32 to test appetite for miners

BHP Billiton’s spin-off of South32 debuts on Monday in what is set to be the biggest mining listing globally in four years and a test of whether investors are starting to see value in battered mining shares.

Forecasts for South32’s debut price range between A$2.00 and A$3.00 a share. The top end would value the company at A$16 billion ($13 billion), making it Australia’s biggest new listing in 15 years and the biggest mining listing since commodities giant Glencore Plc (GLEN.L) in 2011.

Dealers and sell-side analysts said there was strong interest in the shares at the lower end of the range.

South32, which is being hived off by BHP Billiton to allow it to focus on its core businesses, lands just as global miners have been enjoying a small rebound in their shares.

BHP’s shares are up 10 percent over the past month, Rio Tinto (RIO.AX)(RIO.L) and Glencore Plc (GLEN.L) have risen about 5 percent and Anglo American (AAL.L) is up 13 percent, which could help support the new company’s debut, analysts said.

An analyst with RBC Capital Markets in Sydney Chris Drew said: “There will be support from the guys willing to take a longer term view. Others who are wondering whether we’re at the bottom might take a bit longer,”

Interest in the company, named after the line of latitude joining its main assets in Australia and South Africa, is expected to be solid as it fills a gap between the mega-miners and minnows, and offers a diverse suite of assets, from aluminum to silver.

“There is appetite for that real good size, mid-tier, just below the BHP’s and Rio’s. For that reason it’ll attract interest,” a resources analyst at Argonaut Securities in Perth Matthew Keane said.