BHP signs iron ore deal with BlueScope to clear way for Rio merger

18 September 2008

Mumbai: BHP Billiton has signed a 10-year iron ore supply deal with BlueScope Steel, its only domestic customer, ahead of a ruling by the Australian Competition and Consumer Commission on the mining giant's proposal to acquire rival Rio Tinto.

Under the agreement announced yesterday, BHP has guaranteed iron ore supply to BlueScope until June 2019.

BlueScope has agreed to buy 4.3 million tonnes of lump and fine ore a year based on a price reviewed quarterly and linked to movements in the price paid by BHP's Asian customers.

The price is reported to be BHP's average quarterly sales price in Asia, including its spot market sales.

BlueScope also will get an additional 730,000 tonnes a year of iron ore fines to be priced on an index basis, which would be closer to spot market prices.

BlueScope will also a pricing advantage in freight rates because of its proximity to BHP's mines.