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BHP Billiton has shelved plans to build more than $US5 billion worth of rail and port infrastructure in Queensland as part of a broader review of its coking coal growth ambitions.
The miner and its partner Mitsubishi this year cancelled a planned expansion of the Peak Downs coking coal mine and closed their Norwich Park and Gregory operations.
The company recently laid off Brisbane-based workers who had been working on coking coal growth projects after flagging no new major projects would be approved this year across its global operations.
Last month BHP cancelled its $US20 billion-plus Olympic Dam copper-uranium mine expansion and a $US20 billion outer harbour for its iron ore business at Port Hedland.
This week it discontinued the federal environmental approvals process to develop the multibillion-dollar Red Hill and Saraji East coking coal mine developments, which would have been supported by the planned rail and port infrastructure. That's despite the miner having paid New Hope Corp $2.45 billion to buy back the Saraji East project in 2008.
BHP last year flagged plans to build its own 250-kilometre railway line from Goonyella to Abbot Point, capable of carrying 60 million tonnes of coal a year and limiting its reliance on third-party provider QR National. It was expected to start construction by 2015.
The miner also won the rights to develop a new coal terminal at Abbot Point capable of exporting 60million tonnes a year, with first shipments expected by 2016.
A BHP spokesman said on Thursday that the company would "continue to assess the best port and rail infrastructure solutions" but the timing would be linked to its mine growth plans.
It is understood that once BHP halts work on a project, it typically takes about two years to return to the same stage of the process once work is resumed.
A spokesman for Hancock Coal, which has the rights to a neighbouring terminal at Abbot Point, said its port plans would not be affected by BHP's decision to put its terminal on ice.
BHP chief executive Marius Kloppers was bearish about the outlook for the coking coal market in a recent briefing with analysts, and chairman Jac Nasser said last week the Queensland government's decision to raise royalties would make the approval of future developments more difficult.
Mr Kloppers said in August last year that BHP would seek to build its own infrastructure for its Queensland coking coal business to make it as efficient as its iron ore business in Western Australia, where it does not rely on third-party providers.
But commodity prices have fallen sharply since then, reducing BHP's available cash to spend on projects.
The spot coking coal price has plunged 37 per cent to $US140 a tonne since industrial action at BHP Billiton Mitsubishi Alliance mines ended in mid-July. At those prices, many Bowen Basin mines could be bleeding cash. However, most coking coal is still sold on quarterly contract prices set at $US225 a tonne in the third quarter and $US170 a tonne for the upcoming fourth quarter.
Mr Kloppers has admitted to analysts that the $US4.2 billion Caval Ridge project approved last year - of which the cancelled Peak Downs project was a component - is unlikely to produce adequate returns.
This article first appeared on afr.com
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