BHP Billiton on Tuesday said it planned to create a new global metals and mining company based on a selection of its aluminium, coal, manganese, nickel and silver assets.
The demerger will leave BHP Billiton almost exclusively focused on its long-life iron ore, copper, coal, petroleum and potash basins, the group said.
The new company will be listed on the Australian stock exchange, with a secondary listing in Johannesburg, South Africa.
BHP shares sank to the bottom of the FTSE 100 following the news, down 2.6 percent shortly after the market open.
"I think the market is disappointed by the fact that there's no announcement of a share buyback," Yannick Naud, Portfolio Manager at Sturgeon Capital told CNBC. "The investor needs to get some money back, whether it's share buyback or dividend."
CEO Andrew Mackenzie said in a statement that by concentrating on the development and operation of major basins, the group could improve its productivity further, faster and with greater certainty.
"With a simpler portfolio, we are targeting sustainable, productivity-led gains of at least $3.5 billion per annum by the end of the 2017 financial year."
BHP Billiton shareholders will be entitled to 100 percent of the shares in the new, yet to be named company.
The plans were unveiled as BHP reported an 8 percent rise in second-half underlying attributable profit to $5.69 billion, according to Reuters calculations off the full year result. That was just below forecasts for a second-half profit of $5.94 billion, according to Thomson Reuters Starmine's SmartEstimate.
Reuters contributed to this story