BHP Billiton's stocks have surged after one of its largest shareholders called for an overhaul of the group's structure which it argues could release billions in dollars of value for shareholders.

BHP Billiton shares jumped in the last half hour of trade Monday after an international hedge fund unveiled a proposal to end the mining giant's dual-listed structure and spin off its US petroleum business.

Under the plan, BHP would move from a dual company structure, leaving the company domiciled in Australia but with a single scrip listed on both the Australian and London stockmarkets , demerge its US petroleum business into a separate entity listed on the New York Stock Exchange and then unlock its balance of franking credits by undertaking discounted off-market share buybacks.

While BHP Billiton has made no comment on the plan, shares on the ASX leapt in late trade as news of the proposal spread, jumping from $24.82 at around 15.30 to close up 4.6 per cent at $25.73.

The proposal, outlined by Elliott Associates and Elliott International, two entities holding a combined 4.1 per cent of BHP's UK-listed shares, has been discussed by the investor with BHP management, and is aimed at tackling the longstanding discount BHP shares trade at on the British market, which has been the subject of ongoing agitation by some institutional investors for several years.

The dual listing dates back to the BHP merger with South African miner Billiton, in 2001. Since then, the trend has been away from dual listed structures, most recently with Unilever, the British-Dutch conglomerate disclosing it has begun a review of its structure.

The Elliott funds estimate that the British arm of BHP generates only around 9 per cent of earnings before interest, taxation, depreciation and amortisation yet has 40 per cent of shares on issue.

"The long-term misalignment of profits vs shareholder base in the [dual listed company] structure has led to a massive and continuing build up of franking credits – totalling $US9.7 billion or circa 10 per cent of BHP's market capitalisation," the British fund manager said in outlining its proposal.

"Absent a clearly defined optimal path to monetising those franking credits, they are not being appropriately valued by the market."

The prolonged discount BHP shares trade at in Britain undermines the "fundamental principles and objectives" of the dual listing structure which is to achieve equivalent economic returns for both classes of shareholders, the fund manager said.

At the same time, the fund manager argued BHP has failed to achieve critical mass in the petroleum industry in the US, with its onshore acreage opportunities "extremely limited".

"BHP's management simply cannot justify allocating the capital which the US onshore assets would need for the US petroleum business to realise its growth potential or meaningful corporate expansion activities," the US fund manager said.

Rather, BHP would be better off focusing on its "world beating mining assets" such as iron ore, or undertaking share buy-backs at a discount to market.