Regional Coal: Downer, Idemitsu in $900m mining services deal

Australian firm Downer EDI Limited announced on Thursday it has signed a five-year mining service agreement with Idemitsu Australia Resources Pty Ltd (Idemitsu) for the provision of mining services at Boggabri open-cut coal mine in the Gunnedah Basin, New South Wales.

Services provided will include drill and blast, mine planning, and load and haul of both overburden and coal. The new contract starts in December 2011 and will extend the company?s involvement at Boggabri to over a decade, the company said.

The value of the contract is approximately $900 million over the duration of the contract.

Under the base case, the required capital commitment will include $41 million of existing plant and equipment related to the current contract plus new equipment of $114 million ($58 million in FY12, $48 million in FY13 and $8 million in FY14). The total potential capital required for the Boggabri project has been included within Downer?s existing forecasts and will be funded primarily through operating cash flow and new finance and operating leases, it said.

The contract is structured as a schedule of rates with fixed-rate cost recovery for site-related overheads and variable rates by activity performed. Rise and fall is applicable from the tender date. The contract will have annual? reviews linked to changes in cost structure and the agreed annual mine plan. (denny)