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MELBOURNE, Oct 20 (Reuters) - BHP Billiton Ltd./Plc. (ASX: BHP.ax) BLT.L, the world's biggest miner, said it will spend $1.3 billion to expand iron ore output and rail and port operations to keep up with demand from Asian steel makers.
BHP board's approval comes one day after Rio Tinto Ltd./Plc. (ASX: RIO.ax) RIO.L committed $1.35 billion to its iron ore mine and port operations in Western Australia and Brazil's Caemi Mineracao e Metalurgia S.A. CMET4.SA, an arm of the world's top iron ore miner, CVRD VALE5.SA, set a $760 million iron ore expansion.
The $1.3 billion for BHP Billiton's 85 percent share of the project is earmarked for a new mine pit, crushing and screening facilities, new rail cars and tracks, a new stockyard, a rail car dumper and ship loading facilities.
BHP Billiton said it would start work immediately to nearly double iron ore production capacity to 42 million tonnes a year at its Area C iron ore mine in Western Australia, with production from the expansion to begin in the fourth quarter of calendar 2007.
The 2007 start-up is two quarters earlier than the company flagged in its annual report, but the cost and size of the expansion are in line with plans the company outlined in August.
"The bottom line is there's nothing very new here. It's not going to change our forecasts," said JP Morgan analyst David George.
BHP Billiton's partners are Japan's Itochu Corp. 8001.T and Mitsui & Co. Ltd. 8031.T, with 8 percent and 7 percent of the project, respectively. The two Japanese firms said they will together invest a total of about 27 billion yen ($234 million).
Racing to meet hot demand from China's steel makers, BHP Billiton has already boosted production at its Western Australian iron ore operations by around 50 percent since 2001 to more than 100 million tonnes a year.
"We are currently in the feasibility stage for Rapid Growth Project 4, which is focussed on expanding the Newman operations, and are studying further growth options," BHP Billiton's iron ore president, Graeme Hunt, said in a statement.
The company has previously said it was looking to expand its total iron ore capacity to 152 million tonnes a year by 2010. It is scheduled to increasing capacity to 117 million tonnes a year in the second half of calendar 2006.
When the third expansion is completed in 2007 it will be able to handle 129 million tonnes a year, compared with Rio Tinto's planned expansion to 140 million tonnes a year.
BHP Billiton's shares were up 0.85 percent at A$20.22 in a broader market up 0.65 percent in early afternoon trade. ($1=A$1.33)
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