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Ravensthorpe budget blows out to $2.8bn

BHP Billiton Ltd’s Ravensthorpe nickel project budget has blown out to $2.8 billion, more than double the $1.35 billion approved in March 2004, when the green light was given. The resources giant blamed lower-than-expected labour productivity and late delivery of some materials and equipment for the budget increase, the third time the company has revised its predicted costs for the project. The news comes one month after the retirement of BHP Billiton stainless steel materials chief Chris Pointon, who had headed the group since BHP’s merger with Billiton in 2001. The first recorded blow out in the project occurred in August 2005, when the company revised the costs to $1.7 billion. Then, in July this year, BHP warned that cost pressures would result in a 30 per cent increase in the previously approved budget, bringing the expected project funds required to $2.2 billion. “At the time the original cost estimate for Ravensthorpe was prepared, the current tightness and cost escalation for labour and materials, which are especially severe in Western Australia, were not apparent,” new BHP stainless steel materials president Jimmy Wilson said. The massive cost blow out at Ravensthorpe followed big cost increases and delays at Canadian company Inco’s Goro laterite nickel project in New Caledonia, where the budget has risen to $US3 billion from $US2.15 billion. In addition, Brazilian mining giant CVRD – which recently bought Inco – has deferred its Niquel do Vermelho laterite nickel project in Brazil. GRD Minproc is one of the main engineering contractors on the Ravensthorpe project and is also the main contactor on the Vermelho project. These problems follow a disastrous run in the late 1990s, when three Australian companies ran into major technical and cost issues with laterite nickel projects. Only Anaconda Nickel’s Murrin Murrin mine is still operating close to its original form.

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