BHP sells 15% stake in Australian iron ore mine to Japanese Cos
21 June 2013
Global mining giant BHP Billiton Ltd yesterday agreed to sell a 15-per cent stake in its Jimblebar iron ore mine in Western Australia's Pilbara region to two Japanese conglomerates Itochu Corp and Mitsui and Co Ltd for a total consideration of approximately $1.5 billion.
Under the terms of the agreement, Itochu and Mitsui will invest approximately $800 million and $700 million respectively in shares and loans to BHP Iron Ore (Jimblebar) Pty Ltd, BHP said in a statement.
Itochu will acquire 8 per cent stake in the company while Mitsui will have 7 per cent interest.
The Jimblebar mine, located 41 km east of Newman, is one of seven iron ore mines BHP operates in Pilbara. It will have an initial capacity of 35 million tonnes of iron ore per annum and is expected to become operational next year.
The mine is part of BHP's ambitious plan of achieving an iron ore supply chain target of 220 million tonnes per annum from Western Australia by 2015-2016 from the current level of around 185 million tonnes.
BHP Billiton President Iron Ore, Jimmy Wilson, said: ''We are pleased to extend our successful, long standing joint venture relationship with Itochu and Mitsui.''
BHP said that the stake-sale consideration includes a share of capital costs associated with the Jimblebar mine expansion project incurred to date.
The expansion of Jimblebar, together with the expansion of the harbor at Port Hedland and doubling of rail tracks is estimated to cost over $2 billion.
The transaction is expected to close in the September 2013 quarter subject to approval from Australia's Foreign Investment Review Board (FIRB) and other customary closing conditions.
In recent months, BHP has been taking a series of measures to cut costs and generate cash through asset sales, slashing exploration activities, improving productivity and shelving projects as a result of the slump in commodities market.
Including the present deal, BHP has raised approximately $7.5 billion through asset sales over the past 18 months, according to Deutsche Bank data.
Iron ore prices have plunged around 22 per cent from their recent high of $154 a tonne in February and are currently trading at around $120.
Australian Bureau of Energy and Economic Resources expects that iron ore prices will average at around $119 in 2013 although they are likely to drop further to $90 level in the next five years.