Chairman Don Argus said the payment had the full support of the board, and blamed the lengthy delay in settling the matter on differences about the contract between the company and Gilbertson.

BHPB said it has also agreed to reimburse Gilbertson up to GBP150,000 for relocation and other expenses he incurred following termination of his employment, and that he would be entitled to retain rights to a maximum of 228,685 shares of the total of 760,110 he held at the time of his resignation.

The share rights will only vest in Gilbertson's favour if pre-determined performance targets approved by shareholders, and applicable to all other holders, are met.

Gilbertson worked for BHPB and its predecessor companies for more than 32 years and was instrumental in the deal that saw BHP and Billiton merge to form the world's largest diversified mining company.

As part of the transaction he succeeded the merged company's first CEO, Paul Anderson, and was to have remained in the post until June 2005 but left in January citing "irreconcilable differences" with the board.

Reports since his departure suggest he disagreed with the board over corporate opportunities and cost cutting measures.

BHPB said it would continue to provide medical insurance cover for Gilbertson and his wife until June 25, 2005, the date provided under his contracts with the company.