Downer EDI Limited has been awarded a six year magnetite mining contract with Karara Mining Limited (KML) for the provision of services at the Karara Iron Ore Project in Western Australia.

 

KML is an incorporated joint venture between Gindalbie Metals Limited and Anshan Iron & Steel Group Corporation (AnSteel), China’s second largest steel producer.

 

The contract commences this month and has a total estimated value of approximately $570 million. It is a fixed and variable schedule of rates contract which includes a rise and fall mechanism for changes in cost.

 

Downer will establish the mine infrastructure and provide services including drill and blast, and load and haul of waste and ore.

 

New capital expenditure required for the project will be approximately $92 million. This will be funded primarily through operating cash flow and new finance and operating leases. Approximately $41 million of capital expenditure will be required in the 2012 financial year. This amount was included in the capital outlook budget of $400 million provided as part of Downer’s 2011 full year results announcement.

 

The Chief Executive Officer of Downer, Grant Fenn, said the contract would enhance Downer Mining’s exposure to the expanding iron ore sector and also increase its geographical presence in Western Australia.