BHP Billiton and Leighton Holdings signed a heads of agreement in early August 2011 whereby BHP Billiton will acquire Leighton’s HWE Mining subsidiaries, which provide contract mining services to BHP Billiton’s Western Australia Iron Ore operations. The agreement relates to the mining equipment, people and related assets that service BHP Billiton’s Area C, Yandi and Orebody 23/25 operations. These operations collectively account for almost 70% of total material movement for BHP Billiton’s Western Australia Iron Ore operations.
The purchase price for HWE Mining is $735 million, subject to working capital adjustments. Subject to due diligence, definitive agreements, and relevant internal and regulatory approvals, the transaction is expected to close during the fourth quarter of 2011.
BHP Billiton President of Iron Ore Ian Ashby said, “While this move to an owner-operator model will remove a layer of complexity and costs from our business, the real focus of this proposed transaction is the work force. Transitioning to owner operator in this way, rather than by replacing contractors through direct recruitment, is a lower risk strategy, as it would be challenging to replace the highly skilled and long-serving HWE employees in the current environment.”
