* Capital to sustain existing operation
* Spend unexpected, but small relative to mega projects –
UBS
MELBOURNE, June 22 (Reuters) – BHP Billiton
, the world’s largest miner, has approved an $845 million
investment to keep up production at its Illawarra coal
operations in Australia’s New South Wales state, a move that
analysts said was unexpected.
BHP said on Friday it was going to dig a new area at its
Appin Mine which would have production capacity of 3.5 million
tonnes per year of coal used in steel mills from 2016, replacing
production at the West Cliff Mine.
That would sustain total production from its Illawarra,
north of Sydney, operations at 9 million tonnes a year.
BHP approved the spending at a time when major miners have
been under pressure from shareholders, jittery about slowing
global growth, falling commodity prices and rising costs, to
hand back capital rather than splashing out on projects.
An analyst said he had not anticipated the Illawarra
spending over the next two to three years, but said it was small
relative to the mega projects that BHP has signalled it may
delay, including the Outer Harbour iron ore expansion and the
Olympic Dam copper and uranium expansion.
“Eight hundred million dollars is not what we have in our
numbers to be spent…But when spaced over two to three years,
it’s very different by an order of magnitude from the $2-3
billion-plus a year they would need to spend on those projects,”
said UBS analyst Glyn Lawcock.
BHP has indicated over the past month it is unlikely to
approve any major new capital spending in its $80 billion
pipeline over the next 12 to 18 months, as it has been caught in
a squeeze between falling prices and rising costs.
Continued…
