BHP BHP Group Limited

   By Robb M. Stewart 
 

MELBOURNE, Australia--BHP Billiton Ltd. (BHP.AU) is planning a US$204 million expansion of its coking-coal operations in eastern Australia to increase production of the steelmaking ingredient and reduce overall operating costs.

BHP and venture partner Mitsubishi Corp. (8058.TO) on Friday approved the investment in their Caval Ridge mine, where they plan to build a 6.8-mile overland conveyer system to transport coal from the neighboring Peak Downs mine to a preparation plant.

The project is expected to create up to 400 jobs during construction and 200 ongoing operations roles, said Mike Henry, president of BHP's Australian minerals division. Construction is set to begin mid-year and take 18 months to complete.

The investment in the coking-coal business comes after several tough years for the operations. Coal prices have recovered over the past few months, including a surge in recent weeks after a tropical cyclone flooded mines across Australia's Queensland state. Mr. Henry said coking-coal prices were expected to pull back as mines returned to normal operations, but even at longer-term forecasts, the expansion of Caval Ridge was expected to offer a high return for the company.

The bulk of BHP's coal operations are in eastern Australia, centered on coking-coal mines in the Bowen Basin of central Queensland and energy-coal production in New South Wales. It also has a coal operation in Indonesia and owns an equal share alongside partners Anglo American PLC (AAL.LN) and Glencore PLC (GLEN.AU) in Colombia's Cerrejon, one of the world's largest open-pit energy-coal mines.

Coal operations contributed US$4.52 billion to BHP's revenue in the last fiscal year through June, including US$3.35 billion from the Queensland operations that also include a venture with Mitsui & Co. (8031.TO).

Rio Tinto PLC (RIO.LN) in late January moved to capitalize on last year's sharp gains in commodity prices, agreeing to sell a major piece of its coal business for US$2.45 billion to China-controlled Yancoal Australia Ltd. (YAL.AU). Last week, it received approval from Australia's Foreign Investment Review Board for the deal to exit its Coal & Allied Industries Ltd. subsidiary.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

April 20, 2017 23:24 ET (03:24 GMT)

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