By Jane Goldsmith
May 12, 2015
BHP Billiton is slowing projected WA iron ore export targets after weakened Chinese demand and slumping commodity prices restricted its cash flow.
The miner had planned to export 290 million tonnes per annum of iron ore by 2016-17 through a US$2 billion inner harbour debottlenecking project at its Port Hedland shipping terminal.
However, in its March quarter results BHP announced it would defer the spending, which would slow its progress to hit the 290mtpa target by mid-2017.
“WAIO production for the 2015 financial year is now expected to be 250 million tonnes (100 per cent basis); 2 per cent higher than prior guidance. Further growth in supply chain capacity to 270mtpa (100 per cent basis) is expected to be achieved without the need for additional fixed plant investment,” the company stated.
“The potential of our installed infrastructure continues to exceed expectations and as a result we are deferring the Inner Harbour Debottlenecking project. While this will lead to a slower path to system capacity of 290mtpa, it will come at a lower capital cost.”
Top 10 BHP shareholder Australian Foundation Investment Company (AFIC) declared the decision was a “sensible” response, given the uncertainty of the long term iron ore price.
“We felt somewhat uncomfortable about BHP committing to spend lots of capital to expand production in the face of a pretty low price,” AFIC managing director Ross Barker told The Australian Financial Review.
“The message of today is that, ‘we do not want to do the inner harbour [expansion at Port Hedland] until we can get a satisfactory return’.”
BHP did not reveal the exact savings it would achieve in the deferred spending, but Canadian investment bank RBC Capital analysts estimated close to US$600 million.