BHPB deal shows China hunger for WA treasures

CHINA’S growing reliance on the Pilbara’s iron ore stocks was emphasised this week when BHP Billiton signed a 25-year, $11.6 billion ($US9 billion) deal with four of China’s biggest steel producers.

The landmark Wheelarra joint venture, believed to be the nation’s largest single iron ore export contract to date, eclipses Rio Tinto’s 20-year, $US7 billion iron ore contract with China’s largest steel maker Baosteel, signed in 2002.

It also follows on from the $US25 billion LNG deal signed in 2002 and a conditional agreement between the Gorgon Joint Venture partners and the China National Offshore Oil Corporation – all of which point to Western Australia’s growing importance to China’s rapid industrialisation and economic growth.

While dependant on exchange rates and commodity prices over time, the WA Government expects the deal to generate up to $500 million in royalties over 25 years.

This is good news for WA and the Government, which was criticised over royalties arrangements with the Federal Government for the Gorgon LNG project.

Under the terms of the Wheelarra joint venture, BHPB will supply approximately 12 million tonnes per annum of iron ore to Wuhan Iron and Steel Corporation, Maanshan Iron and Steel Company Limited, Jiangsu Shagan Group Co Ltd and Tangshan Iron and Steel.

The Chinese steel mills will take a 40 per cent interest in a sublease over BHP Billiton’s Jimblebar mine near Newman in the north west.

BHP Billiton will retain a 51 per cent interest, while Japanese joint venture partners CI Minerals Australia and Mitsui Iron Ore Corporation will take a 4.8 per cent and 4.2 per cent interest respectively.