Melbourne - BHP Billiton [JSE:BIL] is likely to cut the
first stage of its estimated $10bn iron ore port expansion in half, analysts
and investors said, as it looks to slash capital spending due to rising costs
and an uncertain market outlook.
The Outer Harbour project in Western Australia is one of
three mega projects in an $80bn pipeline that BHP has slowed, under pressure
from shareholders who want bigger dividends and buybacks rather than expensive
projects with no short-term returns.
In February, BHP committed $779m in early funding to build a
100 million tonnes a year outer harbour facility and said at the time it would
be reviewed for full approval in the December quarter this year.
Five analysts and two investors said on Friday BHP's
incoming iron ore chief, Jimmy Wilson, would have to cut plans for the Outer
“He's been told he's got to re-cut it to a smaller project,”
UBS analyst Glyn Lawcock said.
They predicted the logical outcome would be to cut the first
stage of the expansion to 50 million tonnes a year from 100 million tonnes a
Analysts and investors said given that BHP has about 50
million tonnes a year extra rail capacity, the company was likely to look for
ways to milk its existing mines for extra output to fill that capacity, in
which case it would only need 50 million tonnes a year of new port capacity.
“They’re looking at it as 50 million tonnes a year,” said
another analyst, who declined to be named because they were not authorised to
speak to the media.
BHP Billiton declined to comment on whether its incoming
iron ore chief had been told to cut the scope of the outer harbour project.
spokesperson directed Reuters to recent comments by senior BHP managers on the
company putting the brakes on spending plans.