MELBOURNE (dpa-AFX) - Japanese trading companies Mitsui & Co. Ltd. (MITSY) and Itochu Corp. (ITOCY) agreed Thursday to invest a total of about $1.5 billion in BHP Iron Ore (Jimblebar) Pty Ltd for a 15 percent stake in the mine. The investment will expand Anglo-Australian mining giant BHP Billiton Ltd.'s (BHP, BHP.AX, BBL, BLT.L) long term joint-venture relationship with the two companies.
BHP Billiton President Iron Ore, Jimmy Wilson, said, 'We are pleased to extend our successful, long standing joint venture relationship with ITOCHU and Mitsui.'
Mitsui and Itochu already have an ongoing relationship through their collective 15 percent interest in BHP's Western Australia Iron Ore or WAIO, mine, rail and port infrastructure in the region.
The current agreement will see Mitsui investing about $800 million and Itochu about $700 million in the BHP's Australian Jimblebar iron ore mine, which will give them an eight percent and seven percent interest respectively, in the mine.
The investment by the two trading companies will also include the sharing of future development costs for Jimblebar in proportion to their interest in the mine.
The Jimblebar mine is located east of Newman in the iron-ore rich Pilbara region of Western Australia. The mine will have initial production capacity of 35 million tons per annum on a 100 percent basis, with future expansion potential. Once fully operational, it will bring Western Australia Iron Ore's supply chain capacity to 220 million tons per annum on a 100 percent basis.
According to a Japanese news agency Nikkie report, the deal will see Mitsui and Itochu secure an annual output of over five million tons through the deal, including shares of future production increases, which will be equivalent to about 4 percent of Japanese demand.
The investment deal, subject to Australian Foreign Investment Review Board approval, is expected to be completed in the September 2013 quarter.
Itochu and Mitsui, together with BHP Billiton, already have a long term relationship in three iron ore joint ventures, Mt. Newman, Yandi, and Mt. Goldsworthy in Western Australia. The three joint ventures shipped a total quantity of about 180 million tons in financial year 2012.
The asset sale is part of BHP's ongoing divestment program that is focusing on selling at least 10 non-core assets to raise proceeds of at least $25 billion in order to reduce debt and simplify its operations. BHP's debt has risen to a record $30.4 billion. Asset sales totaling $4.3 billion have been announced or completed during the first half of the year.
The miner recently announced the divestment of its Gregory-Crinum coal operation in Queensland, Australia, its Ekati diamond mine in Canada, where it holds an 80 percent stake, as well as its stake in the proposed Browse liquefied natural gas (LNG) project in Australia.
BHP closed Thursday's regular trading session at $58.28, down $2.58 or 4.24% on a volume of 4.37 million shares.
Copyright RTT News/dpa-AFX
© 2013 AFX News
