A major Australian coal producer is planning on significantly ramping up production levels of it’s coking-coal operations in eastern Australia. BHP Billiton Ltd. is gearing up for a major US $204 million expansion which is intended to increase production of coke, a vital ingredient in steel-making. The planned expansion should reduce overall operating costs while allowing a ramp up in production.
In a venture partnership with the Mitsubishi Corporation, BHP approved last week plans to add significant infrastructure to their Caval Ridge mine. The planned expansion will include a 6.8 mile overland conveyor system which will move coal from the nearby Peak Downs mine to a preparation plant. Construction is set to begin within a few months and is expect to last a year and a half. The project is expected to created around 400 jobs during construction and 200 jobs during operation.
The investment comes after a challenging period for the operations. The last few months have seen a rise in the price of coal brought on by increased consumption as well as production problems brought on by natural disasters in other areas. While industry experts expect prices to return to lower levels after production resumes in disaster effected areas the temporary rise in prices offers the opportunity to make an investment which will offer high returns to the company by lowering production costs.
Most of BHP’s coal mining operations in located in eastern Australia especially in central Queensland and New South Wales. However, the company also has a coal mine in Indonesia and holds a share in one of the world’s largest mine located in Columbia. Coal operations were responsible for US$4.52 billion in revenue for the company last year over 70% of which came from operations in Queensland.
Coal production in Australia is concentrated mainly in Queensland, New South Wales and Victoria. Cola is the main source of electricity for Australia providing nearly 70% of it’s power. This along with coal mining operations has caused sharp criticism of Australia among environmental advocates. Coal burning is responsible for nearly 30% of Australia’s greenhouse gas emissions.
However, coal is essential to the Australian economy and along with other mining operations has been a driving factor behind Australia’s economic growth in recent years. Coal is one of Australia’s main exports with between 70% to 85% of the coal mined in Australia being exported. Most of the coal is exported to eastern Asia most notably China. For this reason, in recent years Chinese companies have made numerous attempts at purchasing interests in coal mining companies.
Earlier this year global mining giant Yancoal agreed to sell it’s Australian coal unit to the Chinese controlled Yancoal for US$3.2 billion. The deal was recently approved by the Australian government and will place coal properties in Mount Thorley, Warkworth, and Hunter Valley and the control of companies where the majority of shares are owned by Chinese companies. It will also provide a stake in Newcastle’s Port Waratah coal loaders to Chinese companies.
This comes after the Australian government tightened regulations on foreign investments last year after the Northern Territory Government controversially leased out the Port of Darwin to a Chinese-owned company for 99 years.
