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BHP Billiton Plans Major Capacity Expansion at Western Australia Iron Ore

11/26/2008 - BHP Billiton’s Rapid Growth Project 5 will increase installed capacity by 50 million tonnes across the company’s Western Australia Iron Ore operations for a total capital investment by BHP Billiton of US$4.8 billion.

BHP Billiton announced approval of its Rapid Growth Project 5 (RGP5), which will increase installed capacity across the company’s Western Australia Iron Ore operations by 50 million tonnes. The project represents a total capital investment of US$4.8 billion (BHP Billiton share), including previously approved capital of US$930 million.
 

BHP Billiton also announced this week the termination of its offer for Rio Tinto, saying that the deal is no longer in the best interests of the BHP Billiton shareholders.
 
The company expressed specific concern regarding near-term global economic conditions and the effect of those conditions could have on shareholder value.
 
The company also noted increased risk associated with the combined companies, as well as the difficulty of divesting assets in the current economic climate.
 
“BHP Billiton will continue to invest to be in a position to meet long-term customer demand,” said Marius Kloppers, BHP Billiton’s CEO. “BHP Billiton's priorities for cash flows remain to invest in its core businesses, manage its balance sheet to a solid single A credit rating, maintain its progressive dividend policy and return any surplus cash to shareholders."
The company said the 50-million-tonne increase in installed capacity—which will bring the company’s total capacity to 205 million tonnes per annum* (on a 100% basis)—will come primarily from the Yandi and Mining Area C operations. The project will also deliver significant infrastructure upgrades, including additional shipping berths at the Port Hedland inner harbor (Finucane Island), substantial double tracking of the company’s rail system, and additional crushing, screening and stockpiling facilities at Yandi.

 
“While there is substantial uncertainty in the short term outlook, this investment decision highlights BHP Billiton’s confidence that the long-term outlook remains positive,” said Marcus Randolph, BHP Billiton’s Chief Executive of Ferrous and Coal. “The expansion also underscores our belief that high-quality West Australian iron ore with close proximity to China and the Asian markets, is an important source of supply.  With our strong balance sheet, we are well positioned to invest in hiqh-quality and low-risk projects such as RGP5”.
 
BHP Billiton’s partners in the Western Australia Iron Ore operations are Itochu Minerals & Energy of Australia Pty Ltd, Mitsui-Itochu Iron Pty Ltd and Mitsui Iron Ore Corporation Pty Ltd.
 
RGP5 is expected to deliver first production in the second half of the 2011 calendar year.
 
*BHP Billiton attributable share is approximately 85%.