BHP enters $2 bil agreement with BlackRock's GIP for WAIO inland power

Australian iron ore miner BHP has entered into a binding agreement with BlackRock's subsidiary Global Infrastructure Partners (GIP) to retain operational control of Western Australia Iron Ore's (WAIO) inland power network, the company said in a declaration to the London Stock Exchange on Dec. 9.

"We are pleased to partner with GIP on this arrangement that enables BHP to access capital and maintain operational and strategic control of a critical part of WAIO's infrastructure," BHP's Chief Executive Officer Mike Henry said on Dec. 9.

WAIO's long-term strategy is focused on increasing iron ore production to 305 million metric tons/year, supported by targeted investments and retaining optionality for future growth, the declaration stated.

"Under the agreement, a trust entity will be established that is 51% owned and controlled by BHP and GIP will provide US$2 billion in funding for a 49% stake," the company said. "BHP will pay the entity a tariff linked to BHP's share of WAIO's inland power over a 25-year period."

BHP holds an 85% interest in WAIO, which comprises four main joint ventures in the Pilbara region of Western Australia, according to the company.

The company's WAIO business in the Pilbara region holds five mines, four processing hubs and two port facilities, according to its factsheet.

BHP expects WAIO production at 250-260 million mt in the fiscal year 2024-25 (July to June) and at 251-262 million mt in FY 2025-26, according to the company's declaration.

BHP's WAIO production on a 100% basis is expected to be at 282-294 million mt in FY 2024-25 and is projected to increase to 284-296 million mt in FY 2025-26, according to the declaration.

The agreement does not affect BHP's existing joint venture agreements or BHP's obligations under its agreements with the State of Western Australia, or affect ownership of any WAIO assets, the company said.

According to BHP, completion of the agreement is expected toward the end of FY 2025-26, subject to certain regulatory approvals, including approval from the Foreign Investment Review Board.

The net proceeds will be incorporated into and evaluated in accordance with our capital allocation framework, the company said.

Platts, part of S&P Global Energy, assessed the 62% Fe Iron Ore Index at $105.75/dry mt CFR North China on Dec. 8, down $1.35/dmt from Dec. 5, below a Brazilian Blend Fines offer, and in line with tradable values.