BHP to invest $US1bn more on expanding Worsley Alumina

MINING titan BHP Billiton and its partners have increased the cost and time it will take to complete the expansion of the Worsley Alumina refinery in Western Australia after suffering delays due to the complexity of the project.

After launching a review of the budget and schedule for the project in January, BHP concluded that it will have to invest $US3 billion ($2.85bn) to cover its share of the costs in the Worsley efficiency and growth project, up from an estimated $US1.9bn announced in 2008.

First production from the refinery is expected to start in the first quarter of 2012, BHP said. The project was supposed to be completed in the first half of this year.

BHP owns 86 per cent of the Worsley joint venture, while Japan Alumina Associates holds 10 per cent and Sojitz Alumina (a unit of Sojitz Corp) owns the remaining 4 per cent stake.

The project encompasses expanding the alumina refinery to 4.6 million tonnes of alumina production a year from 3.5mt at the moment, connecting a multi-fuel co-generation plant and developing the Marradong mine. The refinery alone will cost the partners $US2.86bn.

Andrew Mackenzie, BHP's non-ferrous chief executive, said the "refinery expansion is being executed within the existing footprint of the facility, making it one of the most complex brownfield projects undertaken".

Mr Mackenzie added: "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."

Nevertheless, Mr Mackenzie said BHP remains confident that the project will add value to the business over the medium to long-term since it will deliver lower-cost production into a strong market.

Upon completion, Worsley will confirm its position as one of the world's leading alumina refineries, BHP said.

Aluminium prices have been steadily rising since the beginning of the year, buoyed by concerns over power disruptions and robust demand. BNP Paribas expects prices will trend broadly higher as the balance tightens ahead.

Aluminium on the London Metal Exchange for delivery three months ahead was trading at $US2797 a metric tonne overnight, up 13 per cent since the beginning of the year.

Shares in BHP rose 0.4 per cent today, adding 17 cents to $42.21 in morning trade.