BHP Billiton has signed an agreement with Leighton Holdings to acquire the HWE Mining subsidiaries that provide contract mining services to its Western Australia Iron Ore operations for $735 million (A$705 million). The agreement relates to the mining equipment, people and related assets that service the Area C, Yandi and Orebody 23/25 operations. These operations collectively account for almost 70% of Western Australia Iron Ore’s total material movement.

“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,” said Ian Ashby, president-iron ore, BHP Billiton. “Transitioning to an 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.”

The transaction, which is consistent with the company’s previously stated intention to move the Western Australia Iron Ore business from contract mining to owner-operator mining, is expected to close during the fourth quarter of 2011.