Downer EDI Signs $4.6 Billion in Contracts in One Week

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Researched by Industrial Info Resources (Sugar Land, Texas)--Major Australian engineering, procurement and construction contractor Downer EDI Limited (ASX:DOW) (North Ryde, Australia) has signed a $2.75 billion, six-year contract with Fortescue Metals Group Limited (ASX:FMG) (Perth, Australia) for the provision of mining services at the Christmas Creek A-G Iron Ore Mine, in the East Pilbara region of Western Australia. This comes only seven days after Downer announced a $1.8 billion deal with BHP Billiton Mitsubishi Alliance (BMA) (Brisbane, Queensland) to provide similar services at its Goonyella Riverside and Norwich Park coal mines in Central Queensland.

At the Christmas Creek mine, which is due to be commissioned in December this year, Downer will be responsible for the design, manufacture, installation and maintenance of infrastructure, including workshops, fuel storage, warehouses, accommodation and offices, as well as haul and access roads. They also will be managing the surface mining activities, including drill and blast services, ore and overburden haulage, and run-of-mine management.

On July 28, Downer announced that its Mining Division had signed contracts totaling $1.8 billion to provide load and haul, as well as drill and blast, services at BMA's Goonyella Riverside and Norwich Park coal operations in Central Queensland for the next three years. Both of these mines have been in operation for more than 30 years, with the Goonyella mine under expansion.

The contracts with both companies combined will require capital expenditure for new equipment and infrastructure of about $390 million over three years, including $215 million at Christmas Creek and $175 million at Goonyella and Norwich Park, which Downer says will be funded primarily by operating cash flow and new finance and operating leases.

Downer's shares have been on the rebound recently with an almost 50% increase in the past month. At close of trade on Friday, the shares were at AUS$4.87 after dropping to a low of AUS$3.42 on July 1 after its rail division reported a cost blowout of $175 million on its NSW train carriage project on June 1.

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