BHP scraps Queensland coal mine, infrastructure plans

BHP Billiton has dropped plans to build coking coal mines and rail and port infrastructure in Queensland as part of a broader cost review of its metallurgical coal business.

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The mining major is said to have withdrawn proposals for Red Hill and Saraji East mines from the federal government’s environmental approvals process, as well as suspended the planned railway project which connects the Goonyella mine complex to the port of Abbot Point.

“In response to a challenging market environment and a focus on cost reduction, BHP Billiton has delayed the progress of studies for future metallurgical coal mine growth projects,” a BHP spokeswoman told Steel First.

“The Red Hill and Saraji East project options remain part of our long-term growth strategy. These projects were in early study phase and were not due to be approved for execution for some time,” she added.

The spokeswoman did not elaborate whether the rail project would carry on in the long term, but said the company’s metallurgical coal business remains focused on projects that are currently under execution.

In Queensland, this includes the Caval Ridge mine, Daunia mine, Broadmeadow sustaining operations and the third expansion of the Hay Point Coal Terminal. In Illawarra, this includes the Appin Area 9 project.

BHP decided earlier this month to cease production at its Gregory open-cut coking coal mine in the wake of falling coal prices and increasing costs.

The company has also warned that future business decisions regarding growth capital allocation would be affected by Queensland government’s coal royalty hikes.

The proposed 260km railway from Goonyella mine to Abbot Point was originally expected to start construction by late 2013 and be operational by 2015-2016, according to BHP Billiton’s website. It would have a capacity of 60 million tpy and would be used solely by the miner and its joint venture partners.

The Red Hill and Saraji East mines were each expected to produce up to 14 million tpy of coking coal with a mine life of about 25 years. Construction had been planned for 2013 and 2014 respectively.