LONDON--BHP Billiton Ltd (BHP, BHP.AU) said Thursday that it has
agreed to sell a 15% stake in its Australian Jimblebar iron ore
mine to two Japanese trading firms, Itochu Corp (ITOCY, 8001.TO)
and Mitsui & Co. Ltd (MITSY, 8031.TO), for about $1.5
billion.
The Jimblebar mine, located in the iron-ore rich Pilbara region
of Western Australia, is wholly owned by BHP. Itochu has agreed to
purchase an 8% stake in the mine for about $0.8 billion while
Mitsui has agreed to pay about $0.7 billion for a 7% stake in the
mine.
The deal aims at aligning Itochu and Mitsui's interests across
BHP's Pilbara iron ore operations in order to ensure that the
assets continue to be run in a simplified and flexible manner.
Itochu and Mitsui already collectively own 15% of BHP's mine,
railway and port infrastructure in the region.
"We are pleased to extend our successful, long standing joint
venture relationship with Itochu and Mitsui," said BHP Billiton
Iron Ore President Jimmy Wilson. The deal is subject to regulatory
approval and is expected to close in the third quarter of this
year, BHP said.
Including shares of future production increases, the two
Japanese traders will secure an annual output of over five million
tons through the deal, roughly equivalent to 4% of Japanese demand,
according to Japanese news agency Nikkei.
The new Jimblebar mine will have an initial iron ore production
capacity of 35 million metric tons a year and will bring BHP's
Pilbara output capacity to 220 million metric tons on a 100%
basis.
BHP, Itochu and Mitsui already jointly own three other iron ore
mines in the area that provide the Japanese firms with 27.9 million
tons in annual production volume. This is mainly exported to China,
but with the latest investment, the trading houses hope to expand
exports into Southeast Asia, where there are a number of plans to
build blast furnaces, Nikkei added.
The proposed iron ore stake sale brings BHP Billiton's tally of
asset sales over the past year and a half to $6.5 billion. BHP has
used part of the proceeds to cut its debt amid weaker commodity
prices stemming from slower-than-expected global economic
growth.
The spot price for iron ore delivered into China is trading at
$120.6 a ton, according to The Steel Index, a data provider. This
is down nearly 40% from its February 2011 peak following the
financial crisis of 2008-09.
Although iron ore prices have fallen demand for the steelmaking
raw ingredient is expected to continue growing as steel production
rises to a forecast 2.3 billion tons by 2025 compared with 1.5
billion tons last year, led by emerging economies such as China and
South East Asia.
Write to Alex MacDonald at alex.macdonald@wsj.com
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