BHP Billiton lands US$3.2 billion contract

BHP Billiton (BHP-N) has negotiated iron ore sales commitments from four Chines steel mills that have a possible US$3.2 billion value over the next ten years.

The four Chinese steel mills are Wuhan Iron and Steel (Group), Maanshan Iron and Steel, Jiangsu Shagang Group and Tangshan Iron and Steel.

The iron ore will be produced from Marra Mamba ore that is processed at the Area C mine 120 km north of Newman in western Australia. The mine opened last October. The new sales will account for 12 million tonnes of ore per year.

BHP also announced the completion of the formal signing of the Wheelarra Joint Venture with the steel mills and BHP’s existing Japanese joint venture partners, ITOCHU Minerals & Energy of Australia and Mitsui Iron Ore. This joint venture was announced in March and centred on a sub-lease over BHP Billiton’s Jimblebar mine. It involves sales of 12 million tonnes per year of Mt. Newman iron ore over the next 25 years.

Since 1994 BHP has almost doubled system capacity to 100 million tonnes per year with nearly 40 million tonnes per year of this growth achieved in the past two years. System capacity is expected to increase to 110 million tonnes per year by the end of this year.

A feasibility study is nearing completion that will determine if a further expansion to 145 million tonnes per year is to be recommended.

This iron ore production contract follows a separate US$3.7 billion joint venture agreement between BHP and JFE Steel that was announced at the end of August.