BHP Billiton is accelerating plans to develop a $US5 billion-plus ($6bn) iron ore hub in mineral-rich West Africa, as the mining giant reviews its local expansion plans in the face of uncertainty due to the Rudd government’s resource super-profits tax.
Spurred by buoyant demand for steel, which has seen record iron ore prices, and a steadying of political tensions in the region, BHP plans to ramp up development in Guinea and Liberia.
The company believes the area is home to some of the world’s richest deposits of iron ore and says it has parallels to the 1960s start-up of Western Australia’s famed Pilbara iron ore region.
BHP has signed a mineral development agreement with Liberia, setting out taxes, duties and other trade terms for development of four iron ore deposits.
“Combined with the nearby Nimba deposit in Guinea, these leases have the potential to form the backbone of a world-class cluster of mines around integrated rail and port infrastructure, much in the way the Western Australian iron ore operations started,” BHP iron ore and coal chief Marcus Randolph said.
Local news reports citing government officials in the Liberian capital of Monrovia said BHP’s intended spend in the country would be $US3bn.
BHP said it was too early to put a value on any investment.
While not specifically linking Liberia to the planned RSPT, the mining giant has repeatedly said overseas investment opportunities could jump ahead of Australian ones in its development queue.
BHP chief executive Marius Kloppers has been a leading critic of the proposed 40 per cent tax on mining profits and has joined Rio Tinto chief Tom Albanese in calling it the greatest sovereign risk his company faced globally.
The Liberia move comes as BHP ramps up studies on a $US10bn-plus potash operation in Canada, which if approved would be the world’s biggest potash mine. A multi-billion-dollar Indonesian coking coal project has also been resurrected and, according to analyst reports, tripled in size.
BHP plans to combine development of its Nimba iron ore deposit in Guinea, on the Liberian border, with that of the four Liberian deposits it has been excavating. It says the deposits are all near an existing 250km rail corridor from the border to the coastal town of Buchanan.
BHP has said Nimba will cost more than $US2bn to develop.
“The government of Liberia has demonstrated it is open for business,” Mr Randolph said.
BHP said the deal still needed to be ratified by the Liberian legislature, but over the weekend it was endorsed by Liberia’s cabinet following 18 months of negotiations.
Liberia provides BHP, which has always been focused on iron ore access to Asia, with more access to North American and European markets.
Before the global financial crisis, BHP had plans to start producing from Guinea in 2013, with other African iron ore production starting in 2015 or 2016.
A BHP spokesman yesterday said the miner remained in talks with steel giant ArcelorMittal about a joint venture to combine their assets in Liberia and Guinea.
ArcelorMittal has a 70 per cent interest in five Liberian leases.