BHP Billiton knocks down Tower

BHP Billiton (BHP-N) is closing the Tower coal mine in New South Wales, Australia, as part of an ongoing effort to cut costs

Tower is one of four underground mines that constitute the Illawarra operation, the others being West Cliff, Appin and Elouera. The mines produce coking and thermal coal, and have a combined production capacity of 7.9 million wet tonnes annually.

In April 2001, BHP Billiton shut down the Cordeaux mine. The process continues with the closure of Tower. Meanwhile, the Dendrobium mine, currently under development, is expected to start up in 2005 in order to replace the Elouera mine.

Underground development at Tower will cease in April and be followed by a complete shutdown in December. The loss in production will be offset by expansions at West Cliff and Appin.

Capital costs at Dendrobium are pegged at US$126 million.

Rio Tinto sells Moura stake

Rio Tinto (RTP-N) has sold its 40% interest in the Moura joint venture to MIM Holdings for US$166 million.

Regulators have yet to approve the sale, which should be completed in the second quarter. Mitusui Coal Holdings, which has a right of first refusal, must also approve.

Rio Tinto holds its stake in Moura through a 73% interest in Coal & Allied Industries. The subsidiary bought the mine and four others (two of which were sold in late 2001), plus various mining services in early 2001 for US$555 million in cash and debt.

Consortium takes over Cerrejon

Partners Anglo American (AAUK-Q), BHP Billiton (BHP-N) and Glencore International are acquiring full control of Colombia’s largest coal operation, Cerrejon Zona Norte.

The consortium, which already owns a half-stake in the operation, will pay Exxon Mobil US$366 million for its subsidiary, International Columbia Resources, which holds the other half.

The purchase is expected to close in early March. Each company must fund its own pro rata share, similar to when they formed the consortium to acquire their current half-stake in November 2000.

Cerrejon is the country’s largest colliery, producing 19 million tonnes of high-quality thermal material annually. The coal is shipped to international markets via the operation’s 150-km rail-line and port.

The partners plan to combine Cerrejon with their contiguous Carbones del Cerrejon operation, which produces 3 million tonnes of coal annually. The combination is expected to reduce operating costs.

Combined, the mines host 400 million tonnes of proven reserves and 550 million tonnes of probable reserves. Their total resources, including the minable portion, exceeds 2.5 billion tonnes.