BHP Billiton Ltd (BHP - Analyst Report) recently entered into an agreement with Cameco Corporation to sell its wholly-owned Yeelirrie uranium deposit in Western Australia. The asset sale, subject to relevant approvals from the Australian Foreign Investment Review Board and the Government of Western Australia, is expected to generate proceeds of US$430 million.
Yeelirrie Uranium deposit was discovered back in 1972 by Western Mining Corporation and was acquired by BHP in 2005. Located 630 kilometres north-east of Perth in the Northern Goldfields region of Western Australia, Yeelirrie is one of the finest uranium deposits and preferred by miners.
Post asset disposition, Cameco, one of the world’s largest publicly listed uranium producers is expected to carry this promising Yeelirrie project forward with greater zeal and responsibility. Dean Dalla Valle, the Uranium President at BHP Biliton, seems contented regarding this divestiture deal with Cameco.
Billiton’s high quality resource base and low-cost operations ensure significant competitive advantage over the likes of Alcoa Inc (AA - Analyst Report) and Vale S.A (VALE - Analyst Report) . The company’s strategic acquisitions, as well as divestiture of non-performing assets help to control and strengthen its balance sheet, raising investor confidence.
BHP, one of the world’s largest diversified resource companies operating in mineral exploration, production and processing, oil and gas exploration and development, and steel production and merchandising, remains positive based on an improving global economy driven by urbanization and industrialization in the future.
Currently, we are maintaining a long-term ‘Neutral’ recommendation on BHP. Also, the company has a Zacks #5 Rank, implying a short-term (1-3 months) ‘Strong Sell’ rating.