BHP Billiton boosts nickel business (March 29, 2004)

Anglo-Australian giant BHP Billiton (BHP-N) has approved a US$1.4-billion plan to develop its Ravensthorpe nickel laterite deposit in Western Australia. The scheme also calls for a doubling of capacity at the Yabulu nickel refinery in Queensland.

The decision comes as surging Chinese demand is boosting prices for nickel (a key ingredient in stainless steel). Earlier this year, the metal reached a 15-year high of US$17,100 per tonne; it has since retreated to trade at a spot price of US$13,900 per tonne on March 23.

At Ravensthorpe, southeast of Perth, BHP will build an open-pit mine and treatment plant. The plant will use a combination of pressure acid leach and atmospheric leaching to treat both limonite and saprolite ores to produce up to 50,000 tonnes of nickel and 1,400 tonnes of cobalt annually. Both metals will be contained in a mixed hydroxide product, which will be shipped to the other side of the country for refining at the Yabulu facility, 25 km north of Townsville, Queensland.

The Ravensthorpe project is 155 km west of the deepwater port of Esperance and comprises three orebodies: Halley’s, Hale-Bopp and Shoemaker-Levy. Combined, the three are home to a resource of 253 million tonnes grading 0.69% nickel and 0.03% cobalt. Mining of the shallow, flat-lying deposits will begin at Halley’s, followed by Shoemaker-Levy and then Hale-Bopp.

Capacity at Yabulu will be expanded by more than 140% to 76,000 tonnes per year to handle the new material. The refinery’s life will also be extended by about 25 years. Plans at Yabulu call for an extension of the metal-refining facility, in which nickel and cobalt are recovered via solvent extraction. Partially processed ore from Ravensthorpe will be introduced halfway through the circuit. Construction at Yabulu will include one new building, a new steam generator, and several smaller process facilities.

Construction at both sites will begin later this year, with first nickel metal production from the expanded Yabulu refinery slated for late 2007; full-scale production would follow by the second half of 2008.

By then, BHP figures its total nickel production capacity, including output from the Cerro Matoso unit in Colombia, will have increased by more than 50% to 130,000 tonnes per year — enough to rank as the world’s third-largest producer. Cobalt production will jump 70% to 3,400 tonnes annually. The company expects the cost per pound of nickel at Yabulu to fall below the US$1.20-1.30 per lb. experienced at Cerro Matoso.

In all, BHP figures the development and expansion program will cost around US$12.70 per lb. of annual nickel production. The company has already spent some US$85 million studying the project over the past six years to ensure that the problems associated with earlier laterite projects are not repeated.

Meanwhile, BHP has declared a second interim dividend of US8.5 per share, payable May 5, 2004. The payment follows the company’s decision, late last year, to report profits bi-annually rather than quarterly and represents an increase of 13% over the final dividend of US7.5 per share paid last July.