BHP signs US$2 billion deal: Here’s the key takeaway

The BHP Group Ltd (ASX: BHP) share price is currently flat this afternoon, despite the mining giant unveiling a major new infrastructure agreement tied to its Western Australia Iron Ore (WAIO) operations.

At the time of writing, the BHP share price is down 0.12% to $44.41. Meanwhile, the broader S&P/ASX 200 Index (ASX: XJO) has also slightly fallen into negative territory, down 0.20%.

Let’s take a look at what was announced.

A closer look at the agreement

According to the release, BHP entered into a binding deal with Global Infrastructure Partners (GIP), an investment group owned by BlackRock. The latter is the world’s largest asset manager that handles more than $12.5 trillion in assets.

The partnership centres around BHP’s inland power network that supports its WAIO operations in the Pilbara region of Western Australia.

Under the arrangement, a new trust will be set up, with BHP owning and controlling 51% and GIP holding the remaining 49%.

GIP will contribute US$2 billion for its stake, while BHP will pay a tariff based on its use of WAIO’s inland power network over the next 25 years.

BHP will continue to run WAIO and maintain full control of the inland power infrastructure. Management noted that the deal does not affect any existing joint venture agreements or its commitments to the Western Australian government.

WAIO will keep operating as normal, with its long-term goal of increasing iron ore production to 305 million tonnes per year.

What will BHP do with the cash?

Management noted that the proceeds of the agreement will be evaluated and deployed according to BHP’s capital allocation framework. In essence, this will free up capital while still allowing BHP to continue running its operations.

Completion is expected before the end of FY26; however, it is subject to the usual regulatory approvals, such as the Foreign Investment Review Board (FIRB).

What BHP’s executives said

BHP CEO Mike Henry highlighted that the deal gives BHP access to capital while maintaining operational and strategic control. He said:

This arrangement enables BHP to access capital and maintain operational and strategic control of a critical part of WAIO’s infrastructure.

While BHP CFO Vandita Pant added that the move is a strong example of disciplined portfolio management, strengthening the balance sheet and supporting long-term shareholder value.

Brief summary on GIP

Global Infrastructure Partners (GIP) is one of the world’s largest infrastructure investors, with approximately US$189 billion in assets under management. Its investments span energy, transport, water, and digital infrastructure.

What this could mean for the BHP share price

Although the deal has no immediate impact on iron ore production, it does release capital, strengthen BHP’s growth pipeline, and reduce funding pressure during a period of rising project costs across the mining sector.

I think this is a smart move that gives BHP a bit more financial breathing room while still keeping control of how it runs and grows the business.

The post BHP signs US$2 billion deal: Here’s the key takeaway appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended BlackRock. The Motley Fool Australia has recommended BHP Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.