BHP Billiton to expand iron ore operations
BHP Billiton Ltd has backed China to maintain its hunger for steel in announcing a $ 9.89 billion expansion to its iron ore and coal operations.
The world’s biggest resource company is cashed up and will spend $ US6.6 billion in an iron ore project expansion in Western Australia, $ US2.5 billion to expand three metallurgical coal projects in Queensland and $ 400 million on an energy coal project in NSW.
That is part of BHP Billiton’s commitment to $ US80 billion in organic growth projects over the next five years, as it looks to spend some of it massive profits on expansion.
The company reported a record $ US10.5 billion first half net profit last month.
Chief executive of ferrous and coal, Marcus Randolph, said the company was confident about continued demand from emerging Asian markets.
‘‘ In all three of these businesses we have large, high quality resource bases that are close to existing infrastructure and our customers,’’ he said yesterday.
‘‘ In energy coal, increased demand for seaborne thermal coal in India and east Asia provides an opportunity for us to accelerate growth in Mt Arthur’s ( NSW) coal run of mine production.’’ In WA, the company will develop the Jimblebar mine and rail links, to further develop Port Hedland and to build ore blending facilities, taking the annual iron ore capacity to 220 million tonnes.
That included adding two berths and shiploaders and filling its 240 million tonne per annum allocation in Port Hedland’s inner harbour.
In central Queensland’s Bowen Basin, the projects would add 4.9 million tonnes of annual mine capacity to the Daunia operation and a new mining area at Broadmeadow.
The company will also increase energy coal production by four million tonnes per annum to about 24 million tonnes per annum at its Hunter Valley Energy Coal in NSW.
BHP Billiton had wasted money in the past on failed acquisitions so it made sense to pursue organic growth, said Mine Life senior resources analyst Gavin Wendt.
The company’s share price was weaker earlier on Friday but recovered to close up five cents at $ 44.76.
IG Markets strategist Ben Potter said the higher than expected capital intensity of the iron ore expansion of $ US183 a tonne might have scared off investors.
CASHED UP: BHP Billiton’s chief executive of ferrous and coal, Marcus
Randolph says the company has expansion plans