BHP Billiton (ASX: BHP) is a global leader in the resources industry, with a diversified portfolio of natural resources. The company's operations include: iron ore, coking and thermal coal, copper, zinc, oil & gas and diamonds.
BHP Billiton boosts Pilbara despite EU threat to Rio joint venture
In the latest of a series of expansions, BHP Billiton (ASX: BHP) said the hefty preliminary funds would go to buying long-lead items, expanding the inner harbour at Port Hedland, duplicating rail lines and expanding its Jimblebar mine. But it has delayed the timetable for completion of the expansion, known as Rapid Growth Project 6, by a year to 2013.
RGP 6 is designed to bring annual iron ore production capacity from an expected 200 million tonnes, to be hit next year, to 240 million tonnes. It is expected to cost about $US6bn, although BHP has never confirmed this figure.
BHP iron ore president Ian Ashby said approval for the balance of spending on RGP 6 was expected in the second half of this year. This would be about the time the deal to join its Pilbara iron ore operations with Rio Tinto, pending approval from EU competition watchdog the European Commission, is due.
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BHP also yesterday announced it was ramping up its Canadian potash plans, agreeing to acquire Athabasca Potash for $US320m in cash.
Toronto-listed Athabasca's Burr project is next to BHP's Jansen project in Saskatchewan.
The miner, which is in the throes of changing its chairman, also announced director changes that will boost Australian representation on the board.
Former BHP chief executive Paul Anderson will step down at the end of January because he has been invited to join the board of petroleum giant BP, while US nuclear expert Gail de Planque will retire at the same time because she needs continuous treatment for Lyme disease.
They will be replaced by Asciano chairman Malcolm Broomhead, 57, who has led the iron ore miner North (now part of Rio Tinto) and chemicals group Orica, and prominent Australian company director Carolyn Hewson, 54, a former investment banker with Schroders Australia.
Both will join the board on March 31. Chairman Don Argus is due to step down early this year. He will be replaced by former Ford president Jacques Nasser.
BHP's shares were hammered yesterday as the Australian sharemarket clocked up its worst month since late 2008. There are fears about the effect of China's economic slowdown on commodity prices and over a proposed federal tax on mining profits.
The stock ended down $1.30, or 3.2 per cent, at $39.40. Rio shares fell $3.44, or 4.8 per cent, to $68.
By committing mainly to infrastructure expansion in the Pilbara region, BHP can keep its growth plans rolling as Chinese demand increases and Brazil's Vale expands and tries to capture more market share in China by developing bigger ships and reducing the cost of its ore.
Market watchers say the move also gives BHP flexibility to change the mines it develops if the joint venture is successful and it gains access to Rio's vast railway network, extra ports and mine blending options.
If the joint venture passes regulatory muster, Rio has the right to buy into the expansion by funding half the development.
"It appears to be about keeping their relative competitive position -- you can't just sit back in the Pilbara and wait for the joint venture with Rio to happen," Perennial Growth Management partner Ken West said. "It was not long ago they were talking about RGP 5, so it is a strong rollout of growth projects for BHP."
The $US4.8bn Rapid Growth Project 5 was approved by the BHP board in November 2008 and is designed to boost BHP's Pilbara annual iron ore capacity by 45 million tonnes to about 200 million tonnes from 2011. For that project, $US1.1bn in early works were approved in February 2008.
Illustrating the speed with which BHP is expanding, RGP 4, which is designed to boost annual production to nearly 160 million tonnes is still under way, with completion due this half.
The approval of RGP 6 early works is being seen as positive among market observers, but its timetable for full production has been pushed back a year.
Before the global financial crisis hit commodities demand, and while BHP was still in predator mode for its ultimately failed takeover of Rio, the company said it would have capacity of 240 million tonnes of iron ore by 2012.
