Leighton Holdings has signed a Heads of Agreement for the sale of HWE Iron Ore to BHP Billiton in Western Australia.
David Stewart, Leighton’s CEO, said BHP’s intention to move to an owner operator model is well known and the sale of HWE and its assets is a positive for both companies.
“The Heads of Agreement relates to the mining equipment, people and related assets that service the Area C, Yandi and Orebody 23/25 operations. The three operations collectively account for around 70% of BHP Billiton’s iron ore mining in WA and currently represent around $1.1 billion in revenue and $1.4 billion worth of work in hand for Leighton,” Stewart said.
BHP Billiton Iron Ore president Ian Ashby explained that "while this move to an owner-operator model will remove a layer of complexity and costs from our business, the real focus of this transaction is the workforce. 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.
The sale is estimated to be around $705 million.
Stewart said this transaction will generate substantial cash for re-investment in the Leighton group.
He went on to say that “one particular focus for us as we work with BHP to finalise the sale is the orderly transition of our 2500 people. We will work actively with BHP to ensure our people are well looked after and informed throughout this process.
Following the sale, Leighton is focusing on tendering new mining contracts in WA, Mongolia, Southern Africa and South East Asia.
The transaction is expected to close during the fourth quarter of 2011.