BHP Billiton says the cost of expanding its Worsley alumina refinery has increased by more than $US600 million due to its complexity of construction and broader inflationary pressures.
BHP Billiton says the cost of expanding its Worsley alumina refinery has increased by more than $US600 million due to its complexity of construction and broader inflationary pressures.
BHP announced today said the total capital cost estimate of the 1.1 million tonne per annum expansion and development of the Marradong bauxite mine had increased to $US3.482 billion.
That cost includes $US2.86 billion for the refinery expansion, up from the $US2.2 billion forecast in May 2008.
The remaining $US622 million cost increase is for the development of Marradong and connection to a multi-fuel co-generation unit, which was not quoted in the original cost estimates.
BHP said it now expected production to begin at Worsley in the first quarter of next year.
BHP Billiton non-ferrous chief executive Andrew Mackenzie said the refinery expansion was one of the most complex brownfields projects ever undertaken, because it is being constructed within the existing footprint of the plant.
"Such complexity has resulted in significantly lower levels of construction progress than previously anticipated, while broader inflationary pressures and the strengthening of the Australian dollar have also contributed to the cost increase," Mr Mackenzie said in a statement.
"Upon completion of the Worsley Efficiency and Growth project, the refinery will have the capacity to produce 4.6mtpa of smelter grade alumina, confirming Worsley as one of the world's leading alumina refineries. '
"We remain confident that the project will add value to the business over the medium to long term as it delivers low cost production into a fundamentally strong market."
BHP holds an 86 per cent stake in Worsley Alumina, with the remainder held between Japan Alumina Associates and Sojitz Alumina.
Meanwhile, BHP said it would invest a further $US488 million ($A463 million) into the development of its Jansen Potash project in Saskatchewan in Canada.
The additional money will fund preparation of the site for the project, and enable the development of the first 350 metres of production and service shafts if government approvals are received, BHP said in a statement.
The new investment takes BHP's investment in the Jansen potash project to $1.2 billion, which it said reflected its commitment to develop a world class potash business in Saskatchewan.
BHP began plans to develop its own potash business after an unsuccessful $US45 billion bid for Potash Corporation of Saskatchewan Inc.
A feasibility study on Jansen began in February, and BHP has since constructed the refrigeration centre and drilled over 55,000 metres of wells needed for production and service shafts, it said on Friday.
On the current schedule, production of saleable potash from Jansen is expected to begin in calendar year 2015, it said.
About eight million tonnes of agricultural grade potash, which is used mostly in fertilisers, could be produced from Jansen, a mine with an estimated lifespan of 70 years.
BHP said it was continuing to to look at other potential potash projects in Saskatchewan, with a business there possible of reaching annual production of over 16 million tonnes per annum.
