BHP hit with cost blowout at aluminum project

BHP Billiton, the largest mining company, said that the cost of expanding its Worsley aluminum project in Western Australia has increased 58% to USD 3 billion and completion delayed at least 6 months.

Mr Andrew Mackenzie CEO of Melbourne based BHP's non ferrous unit said that “The complexity of expanding the refinery 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.”

BHP said in the statement that the estimates include developing the Marradong mine, enlarging the refinery and connecting a multi fuel cogeneration unit. First production is now expected in the first 3 months of 2012. It was reviewing the budget for Worsley and that it was on schedule for completion in the H1 of 2011.

BHP approved the project in May 2008 at a cost of USD 1.9 billion to increase mining boost refinery capacity by 31% to 4.6 million tonnes and upgrade the port serving the site. Alumina is a semi processed material refined from bauxite ore that is used to make aluminum.

The cost estimate covers BHP's share of total spending on the expansion. BHP owns 86 per cent of Worsley, with the rest held by Japan Alumina Associates and Sojitz Alumina. The project produced 1.5 million tonnes of alumina in the 6 months ended December 31.