Mining giant BHP Billiton is looking to create a separate $14 billion company comprising its aluminium, bauxite and nickel assets.
Shares in the mining giant jumped more than two per cent on news a demerger is BHP's number one option, after months spent studying the "next phase" of its simplification.
"A demerger of a selection of assets is our preferred option," the company said in a statement.
A portfolio of its iron ore, copper, coal and petroleum assets would retain the benefits of diversification, generate stronger growth in cash flow and deliver a superior return on investment, it said.
"By increasing our focus on these four pillars, with potash as a potential fifth, we will be able to more quickly improve the productivity and performance of our largest businesses," BHP said.
BHP's West Australian Nickel West business, which comprises three mines, concentrators, a smelter and refinery, has long been slated for a demerger, along with other unloved aluminium and manganese assets.
Reports suggest the value of a demerged company would be about $14 billion.
The company's board examined structural alternatives at a meeting this week, and will do so again at a meeting next week, before the release of its full year earnings report late on Tuesday.
"If any material decisions are made, they will be announced immediately," BHP said.
Morningstar analyst Mark Taylor said a demerger appeared to make sense for BHP.
"I can see why BHP wants to get rid of those assets, they're not the crown jewels and they're not world class assets and there's merit in simplifying the portfolio," he said.
But spinning off non-performing assets would come at the expense of some diversification, Mr Taylor said.
Shareholders would likely be distributed demerged shares.
Some may immediately offload those shares, but others could hold onto them in the hope more value would be recognised in hidden assets once they were placed in a new entity, Mr Taylor said.
BHP shares gained 89 cents to $39.05.
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