The miner scales back its infrastructure plans.
A version of this article appeared originally on Fool.com.au.
SYDNEY -- BHP Billiton (LSE: BLT) (NYSE: BLT.US) has cancelled another US$5 billion in plans for new rail and port infrastructure to support its coal mines in Queensland.
Whether that's a direct effect of the recently announced hike in royalties on coal by the state government is unknown, but was likely to have been a factor in the mining giant's decision. With coal prices falling 37% since mid July, BHP is reviewing all its operations and new projects in coal -- those that don't make the grade are being cut back or cancelled.
Earlier this year BHP and its partner Mitsubishi cancelled a planned expansion of the Peak Downs coking coal mine, and closed the Norwich Park and Gregory operations. This week it discontinued plans to develop the Red Hill and Saraji East coking coal mine projects, despite BHP paying New Hope Corporation $2.5 billion to buy Saraji East back in 2008.
CEO Marius Kloppers has previously said that BHP intended to build its own coal infrastructure for its Queensland coal business, to make it as efficient as possible, similar to its iron ore operations in the Pilbara, in Western Australia. The 250 km railway line from Goonyella to Abbot Point, would have made the miner less reliant on QR National.
Earlier this year BHP cancelled plans for the US$20 billion expansion of its giant copper and uranium project, Olympic Dam; and a US$20 billion expansion of the outer harbour at Port Hedland, so that it could increase iron ore exports.
Despite the cancellations of such large projects, BHP still expects to spend around US$22 billion on capital expenditure on various projects in the 2013 financial year. Fellow iron ore miner, Rio Tinto (LSE: RIO) (NYSE: RIO.US) is pushing ahead with its plans to ramp up iron ore production to around 353 million tonnes a year, despite prices for iron ore slumping from over US$150 a tonne to around US$100 a tonne currently.
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> Mike owns shares in BHP Billiton.