Minter Ellison’s Perth office advised Leighton Contractors on its $211 million acquisition of contract miner Henry Walker Eltin (HWE) Mining. HWE provides surface and underground mining and bulk materials movement expertise to the Australian and New Zealand mining sectors, and has contracts with companies in the iron ore, nickel and gold mining sectors.
The Minters team, led by Greg Steinepreis and including Graham Anstee-Brook, Goran Galic and Troy McKelvie, reported on 13 mining services agreements after due diligence had been completed by Freehills, reviewed existing contracts with BHP Billiton over three iron ore mining services agreements in Western Australia and assisted the negotiations for three replacement BHP Billiton agreements. Mallesons Stephen Jaques acted for BHP, with Alan Murray the lead partner.
The report on the 13 mining services agreements was made at the end of last year, and work then started on the three BHP contracts, collectively the biggest in the transaction in terms of value and the size of the mining operations. Following that report, the renegotiation of those three contracts began.
Steinepreis said the completion of the entire acquisition depended on the successful negotiation of those three contracts, which was done in 2.5 months. “Normally you would be looking at six months minimum to negotiate those sorts of contracts,” he said.
“We were lucky that the three were similar, and we were dealing with them as a package. Sometimes there were different issues, but we were trying to keep the base terms the same. Normally one contract would take six months, so three condensed into two months was really tough.”
Steinepreis said contract mining contracts were always “taxing” on lawyers because successful negotiations require a deep understanding of the industry and its risks.
The financing of the transaction required the implementation of an innovative mechanism, whereby parties agreed on a regime for payments and security obligations that would protect the principal if the new contractor went into liquidation. Galic said the mechanism was “quite cutting edge” in its structure, what it allowed the parties to do and how.
While the details of the arrangement were confidential, he said it was designed so BHP could take steps to protect its mining operations if “certain triggering events occurred”. Michael Riches of Clayton Utz also acted for Leighton on the security structure of the deal.
The HWE Mining/Leighton venture will have a turnover of $1 billion a year, operate more than 20 mines and employ 2,500 personnel.