BHP Billiton will spend nearly $US10 billion ($9.89 billion) to expand iron ore operations and energy and metallurgical coal projects in Western Australia.

The world’s biggest resource company will spend $US6.6 billion in an iron ore project expansion in Western Australia, $US2.5 billion to expand three metallurgical coal projects in Queensland and $400 million on an energy coal project in NSW.

BHP shares initially rose 0.5 per cent on the news, but slipped in morning trade and were recently down 0.5 per cent at $44.51. Rival Rio Tinto rose 0.6 per cent.

The company said it and its partners would spend $US7.4 billion to develop the Jimblebar mine and rail links, to further develop Port Hedland and to build ore blending facilities, taking the annual iron ore capacity to 220 million tonnes.

BHP Billiton’s president of iron ore, Ian Ashby, said the intention was to develop the port capacity so that the company could fill its 240 million tonne per annum allocation in Port Hedland’s inner harbour.

‘‘We have intentionally overbuilt the ore handling facilities at Jimblebar and expect to incrementally grow mine production to ensure that our port and rail systems are operated at full capacity during this debottlenecking program,’’ he said in a statement.

BHP Billiton said first production from the Jimblebar mine was expected in early calendar 2014.

A total of $US3.4 billion will be spent on the Jimblebar mine, including buying rolling stock, with initial capacity of 35 million tonnes per annum, with embedded options to expand to 55 mtpa.

A further $US2.3 billion, including BHP Billiton’s share of $US1.9 billion, will be spent on Port Hedland, adding two berths and shiploaders and other works.BHP Billiton and its partners will spend $US1.7 billion on the port blending facilities and rail yards.

The Melbourne-based company also approved spending $US2.5 billion ($A2.47 billion) on three coking coal projects in the Bowen Basin in central Queensland. BHP’s share is half of the total $US5 billion to be spent on the expansion.

BHP Billiton metallurgical coal president Hubie van Dalsen said the company had a deep pipeline of expansion projects to develop its large reserves of metallurgical coal.

‘‘Our strategy is to rapidly progress development of these projects to capture the increasing demand we see for hard coking coal,’’ he said.

BHP Billiton said the projects would add 4.9 million tonnes of annual mine capacity to the Daunia operation and a new mining area at Broadmeadow.

In a third statement, BHP Billiton said it would spend $US400 million to expand Hunter Valley Energy Coal in NSW, to increase coal production by four million tonnes per annum to about 24 million tonnes per annum.

‘‘The emergence of demand for coal in the key growth markets allows us to get product to market quickly, ahead of further coal preparation plant expansions,’’ BHP Billiton Energy Coal President Jimmy Wilson said.

BHP Billiton is cashed up after reporting a new Australian record first half net profit in February of $US10.524 billion ($A10.41 billion) for the six months to December 31.

BHP Billiton stocks rose 51 cents to close at $44.71 on the ASX yesterday.

Sourced & published by Henry Sapiecha

Nick Curtis made a $5 million contrarian bet in 2002 to develop an Australian rare earth mine, aiming to challenge China’s control of global supply of the metals. His company, Lynas, now has a market value of $3.5 billion.

Curtis, 53, saw his gamble start to pay off last year when China slashed rare earth exports, causing prices to surge as much as 13-fold and setting off a scramble to lock in alternative sources of the metals used in missile guidance systems, iPods and hybrid cars.

With China controlling more than 95 per cent of the world’s rare earths, Lynas’s stock jumped almost fourfold since June 30 as investors sought more secure future supply.

“The dominance of China in rare earths was unsustainable,” Curtis, chief executive of Lynas, said in an interview.

“I’d pictured the need for order in the industry, that these were important metals that would ultimately need a stable, secure non-China supply chain,” said Curtis, who graduated with a bachelor’s degree in fine arts from the University of Sydney.

His decision to invest in rare earths was informed by experience with China’s aluminum industry, where mushrooming construction of smelters led to power shortages followed by a government clampdown and industry regulation.

“The reform process in China in the metals sector goes through a period of unfettered competition leading to chaos followed by which the state tries to get control of things again,” Curtis said.

New supply

Sydney-based Lynas, the second-best performer on the benchmark S&P/ASX200 index last year, is set to become the first new source of supply outside China in at least two decades with the start up this year of the $535 million Mt Weld project, the world’s richest deposit of rare earths according to Lynas.

Ore production will begin this month at the mine about 1000 kilometers north-east of Perth. Lynas shares ended the day flat at $2.10.

Rare earths are 17 chemically similar elements used by companies such as Toyota, Apple and Raytheon. They include neodymium, cerium and lanthanum used in sonar systems, flat-screen TVs and computers.

The price of lanthanum oxide, used in hybrid batteries, has surged more than 13-fold since the second quarter to $US92 a kilogram, according to Lynas’s website. Vehicles such as the Toyota Prius hybrid contain about 10 kilograms of rare earths, used to make lightweight batteries and motors.

Working in China

Curtis developed an interest in rare earths working with Madame Bai Jie, a former head of raw materials at China’s state planning commission. He worked for six years from 1994 at a unit of China National Nonferrous Metals Industry Corp, which controlled all of China’s non-steel-related metals until 2000.

Curtis bought Mt Weld from Anaconda Nickel, part-owned by Glencore International.

Anaconda’s CEO was Andrew Forrest, today Australia’s richest man, with a fortune of $6.9 billion, according to Forbes Asia. Forrest went on to start Fortescue Metals, the fourth-biggest supplier of iron ore to China.

Forrest “epitomises going long where China is short, which was the right move,” Curtis said. “I went long where China is ultra-long, which was the wrong move for the particular time” about 2002.

Mining priority

China made rare earths production a priority in the early 1990s under Deng Xiaoping, dominating the market, pushing down prices and rendering mines elsewhere uneconomical. The government introduced its export quota system in 1999.

Rare earth shortages followed the government’s directive in 2006 to create larger domestic companies while curbing output and exports.

About 50 per cent of global rare earth demand comes from customers outside China and they are looking elsewhere for supplies, Deutsche Bank said in a report last year.

Global demand for rare earths is forecast to rise to $US11.2 billion by 2014 from $US7.8 billion last year, Lynas said in a presentation last month.

“Nick’s always been an entrepreneur,” said Warwick Grigor, an equity analyst at BGF Equity in Sydney, who’s tracked the “exceptional” Mt Weld deposit since the mid-1980s. “He saw an opportunity there. It’s probably an understanding of the market he’s picked up from dealing with the Chinese.”

Future prices?

To be sure, prices of some rare earths, including lanthanum, may start to drop by 2013 as additional production creates a “vast oversupply,” Western Minerals Group, a Canadian exploration company, forecast last month.

Curtis, a former executive director of Macquarie Group and head of its commodity trading desk in Sydney, founded Sino Gold Mining, the owner of China’s second-largest gold mine whose shares began trading on the Australian stock exchange in 2002. The company was bought by Eldorado Gold in 2009 for about $C2 billion.

“We were insiders when no one else could penetrate China,” said Jake Klein, the former CEO of Sino Gold and now the chairman of Conquest Mining and board director of Lynas.

The financial crisis forced Curtis to suspend work on Mt Weld in February 2009 after failing to lock up funding. He raised capital in the equity market in September that year after the Australian government blocked China Non-Ferrous Metal Mining Group Co from buying a majority stake.

“This being a strategic resource with existing supplies controlled by China, sophisticated investors got the story in a nanosecond and the deal built its own momentum,” said Alan Young, head of natural resources & infrastructure in Sydney for JPMorgan Chase, which managed and underwrote the $450 million share sale.

China Non-ferrous Metal offered to pay $252 million for a 51.6 per cent stake in Lynas. The company has a market value today of $3.5 billion.

“I’d be really disappointed today if I had gotten off the bus somewhere along the way looking at the speed it’s moving today,” Curtis said.

Bloomberg News

Sourced & published by Henry Sapiecha

WA’s mining boom is raking in the money for the state government.

Western Australia’s burgeoning mining royalties have continued to strengthen the state’s economy, with the government sector recording a $1.1 billion surplus for the first half of the financial year.

The operating surplus of $1.1 billion for the first six months of 2010/11 is a huge turnaround from the $259 million operating deficit for the first half of 2009/10.

Treasurer Christian Porter said the WA Quarterly Financial Results report showed the state reaped nearly $12.3 billion worth of revenue for the first half of 2010/11.

That is up by $2.1 billion on the same period last financial year.

“The main driver of this increase was a rise of $964 million in mining royalties, partly due to the state government’s successful negotiations to remove the royalty concession on iron ore production,” Mr Porter said.

Increased taxes added an extra $509 million to revenue as well as the one-off payment of $350 million by BHP Billiton and Rio Tinto resulting from changes to the State Agreement Acts.

The report revealed that the property and retail sectors remained subdued in the first half of 2010/11, resulting in lower stamp and other transfer duties, which were down $89 million.

General government sector expenditure was also up $761 million, blowing out by 7.3 per cent because of higher grants spending and the government’s one-off payroll tax rebate.

However, Mr Porter said the December result showed that public sector salaries grew by only 4.9 per cent and reflected the government’s effort to rein in spending.

Public sector net debt also rose by $446 million in the first six months of 2010/11, in line with planned spending on major infrastructure.

Spending on public infrastructure was up $338 million from the same period in 2009/10 due to construction on the Southern Seawater desalination plant, Fiona Stanley Hospital and other health infrastructure projects.

Sourced & published by Henry Sapiecha

Mining giant Rio Tinto has announced that it will invest more than $US1 billion ($988.88 million) at the group’s existing iron ore operations in Australia and Canada.

“Rio Tinto has approved a $US933 million ($A922.62 million) investment to extend the life of the Marandoo iron ore mine by 16 years to 2030,” the London-based resources giant said in a statement.

The Marandoo mine is part of the Anglo-Australian miner’s large operations in Western Australia’s Pilbara region.

At the same time, Rio Tinto said it has agreed to invest more cash in its Canadian iron ore joint venture.

“Rio Tinto has given the go-ahead to a further $US277 million ($273.92 million) investment (Rio Tinto share $US163 million ($161.19 million)) in the next phase of a project that will ultimately raise the Iron Ore Company of Canada’s concentrate production capacity by 40 per cent to 26 million tonnes per year.”

The Iron Ore Company of Canada is the nation’s biggest iron ore producer and is 58.7-per cent owned by Rio Tinto.

AFP

Sourced & published by Henry Sapiecha

China’s central bank raised interest rates for the second time in just over a month in a bid to dampen high inflation and guide blistering economic growth to a sustainable level.

The People’s Bank of China announced Tuesday on its website that the benchmark one-year deposit rate would rise by a quarter percentage point to three per cent and the one-year lending rate would increase by a similar amount to 6.06 per cent. The increases are effective on Wednesday.

Its last rate rise came on Christmas Day, when the bank raised both benchmark rates by a quarter point. China’s leaders have sought to cool surging inflation that could pose a threat to political stability.

Rising prices are especially sensitive in a country where poor families can spend up to half their incomes on food. Higher incomes have helped to offset price rises, but inflation undercuts economic gains that help support the ruling Communist Party’s claim to power.

In January, the central bank signaled that fighting inflation would receive priority this year, stating in a report issued after an annual planning meeting that “stabilising price levels will receive more preffered status.”

Tuesday’s announcement, which is the third rate rise since last October, dragged European shares lower. Asian markets were already closed.

Investors worry that slower Chinese growth could affect the United States, Australia and other economies by cutting demand for their exports of iron ore, machinery and other goods & commodities.

Inflation jumped to a 28-month high of 5.1 per cent last November before moderating in December, but it has worried leaders who fear that a sharp rise in living costs could trigger unrest. Inflation has been sticking well above the government’s target of three per cent.

China’s battle with inflation marks a sharp contrast with the United States, Europe and Japan, where growth has been muted in the aftermath of the financial crisis.

China’s rapid rebound from the global recession saw its economy, the world’s second largest, growing at a double-digit rate – a blistering expansion that slowed by the end of last year.

Analysts expect growth to slow further this year from 2010′s expansion of 10.3 per cent as Beijing clamps down on credit and tries to prevent inflation, which has been largely confined to food and property, from spreading to other areas.

Chinese leaders ordered a shift from easy credit to a “prudent monetary policy” in 2011 in a planning report issued in December.

Last year’s rapid growth was driven by a flood of investment in property and other areas. Analysts have urged Chinese authorities to do more to rein in the lavish lending by state-run banks that is driving investment, a large chunk of which is believed to be in speculative property deals.

In January, the banking regulator again ordered banks to tighten risk controls after the country’s biggest state-run commercial banks splashed out nearly 240 billion yuan ($36.0 billion) in new loans in the first 10 days of the year.

Authorities are also considering ways to penalise banks for flouting orders to cut back lending.

Borrowing for real estate development and other projects is the lifeblood for the sales by local governments of land use rights that provide a huge share of their revenues. Such sales rose 70 per cent in 2010, helping push property prices 6.4 per cent higher compared with a year earlier.

A huge pool of nonbank financing nearly doubled the amount of money available for investment last year, much of it “off balance sheet” lending whose exact scale is unknown.

AP

Sourced & published by Henry Sapiecha

Mining companies spent more than $20 million to sink a tax on profits, and Kevin Rudd’s Labor leadership in the process.

New figures released by the Australian Electoral Commission show the Minerals Council of Australia spent $17 million, BHP Billiton more than $4 million and Rio Tinto more than $537,000 in their battle against the Rudd government’s resource super profits tax.

The government wanted to impose a 40 per cent tax on the so-called “super profits” of the country’s mining companies. But Prime Minister Julia Gillard, who ousted Mr Rudd as the tax debate entered a stalemate, negotiated with the biggest companies for a 30 per cent mineral resources rent tax applying to coal and iron ore only.

However some miners still refuse to accept the tax.

Infrastructure Minister Anthony Albanese said the miners had waged a misleading campaign.

“We know in the lead-up to the last election there was a considerable amount of advertising done against the government, much of it very misleading,” he said.

The Australian Electoral Commission figures also showed the Liberal Party continued to benefit from large donations from tobacco companies and the hotels and gaming industry spent big on both major parties.

But trade unions remained Labor’s key financial backers. The Australian Workers Union and the Shop, Distributive and Allied Employees’ Association each gave $200,000 to the ALP’s federal branch, which received $7.75 million in total over the 2009/10 financial year.

Billionaire mining magnate Clive Palmer’s Mineralogy was the largest individual donor to the federal Liberals, contributing $500,000 out of a total $6.3 million.

Across all states the Liberals received $41.22 million, compared with Labor’s $36.22 million.

Tobacco companies Philip Morris and British American Tobacco gave donations totalling just over $300,000 to the Liberal and National parties, while Labor and the Greens have banned such donations.

NAB and ANZ bank donated $100,000 each to Labor and the Liberals.

The nation’s 60 political parties received $89.5 million over the financial year – down from $98 million the previous year.

AAP

Sourced & published by Henry Sapiecha

Louise Armitstead

INSTITUTIONAL investors have written to BHP Billiton and Rio Tinto demanding that they ditch ambitions for ”wasteful mega-deals” and each embark on multibillion-pound share buyback schemes instead as speculation builds that BHP is lining up another big takeover target.

The shareholders, who have written individually, have asked for commitments from the boards of the mining companies that they use their strong balance sheets to return cash to investors.

The investors have moved to pre-empt deals in the mining sector that analysts and investment bankers have predicted.

Some shareholders have told the companies they are prepared to move to vote down the re-election of key members of the board if they do not agree to the commitments.

On Friday, rumours swept the market that BHP was planning a bid for BG Group. Analysts at Exane BNP Paribas fanned the flames by saying that a takeover would allow BHP to revitalise its oil and gas arm.

BG has extensive interests in Australia following the 2008 acquisition of Origin Energy for $13 billion, and late last year announced plans to spend $15 billion developing an LNG project in Queensland.

In London trading, BG’s shares rose to £14.041 ($A22.38) valuing the company at £4.5 billion, while BHP shed 53p to £23.841.

Investors have been spooked by the rumours coming so soon after BHP’s disastrous $US40 billion hostile attempt to buy Potash, the Canadian giant.

The bid’s failure fed expectations that BHP would target the energy sector as its only viable expansion option.

One of BHP’s top 10 shareholders said: ”Frankly after the Potash debacle, we are not too enamoured with BHP’s bid ambitions. It was expensive and ambitious and even then Marius Kloppers [chief executive of BHP] told us that we wouldn’t see the benefits of the deal for as long as 10 years. This is not the sort of thing we want him to spend the money on.”

Another investor said: ”Kloppers is very deal hungry – he’s told us he wants to preserve the cash for expansion, but we just don’t see the point, or the value.”

BHP has reportedly got an eye on Anadarko, one of BP’s partners on the ruptured well in the Gulf of Mexico.

Rio chief Tom Albanese is seen as being just as ambitious to complete a deal, particularly after the collapse of its merger talks with BHP three years ago.

Rio is in talks with Australian miner Riversdale over an agreed $3.9 billion bid. The company has also agreed to increase its holdings in Ivanhoe Mines in Mongolia.

Rio approved major capital projects totalling $5.5 billion in the fourth quarter last year.

The company spent time recovering after it bought Canadian aluminium producer Alcan for $38 billion in 2007.

The damage to Rio’s balance sheet from what was regarded as a reckless acquisition, made when global metal prices were at record highs, had to be repaired by a series of asset sales and a $15.2 billion rights issue.

The company’s net debt load is now $27 billion lighter than it was at the end of 2009.

One of Rio’s key shareholders said: ”There’s a danger with Rio that Riversdale is just the start. We want assurances that there will not be any attempt at big deals.”

Sourced & published by Henry Sapiecha

The West Australian Information Commissioner has ordered Regional Development Minister Brendon Grylls to release information about his dealings with mining magnate Clive Palmer.

For months the WA opposition has pursued the government over why Mr Palmer’s company Mineralogy was not forced to pay a $45 million bond for the project in the Pilbara.

In March last year opposition state development spokesman Mark McGowan applied under Freedom of Information for all documents to and from the minister’s office concerning Mineralogy and its chairman Mr Palmer, a National Party donor.

As a result Mr Grylls, the WA National Party leader, released 11 edited documents but refused to hand over a further 17 because he viewed them as outside the scope of Mr McGowan’s application.

The information commissioner found Mr Grylls’ decision was “deficient” because it did not give “details of the reasons for the refusal”.

“The notice given to the complainant only asserted that the 17 documents, to which access was refused, were exempt,” the finding stated.

“However, the material facts that is, the facts necessary to constitute the exemption claimed and references to the material on which the minister’s findings were based were not included in the notice.”

Following a search of an email account of a former staffer of Mr Grylls, the commissioner also found six additional documents relevant to the FOI application.

Mr Grylls will now be forced to reveal about 35 additional documents either partially or in full.

Although the minister and Mr Palmer can appeal the decision through the courts, Mr McGowan called on them to be open and transparent.

“Mr Grylls must now come clean and release the documents,” Mr McGowan said.

“While Mr Grylls and Professor Palmer can appeal this decision to the Supreme Court, I call on them to finally be open and accountable and release the documents.”

He said the decision to exempt Mineralogy from the paying the environmental bond had saved Mr Palmer $45 million and “brought into question the integrity of the state’s environmental approvals process”.

“Earlier documents released regarding this matter show that Mr Grylls was intimately involved in lobbying the environment minister and the premier’s office to assist Clive Palmer’s project,” he said.

AAP

Sourced & published by Henry Sapiecha

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