In its corporate old age BHP Billiton is getting a little forgetful.
A little over two weeks ago the company took investment analysts on a tour of a few of its half-completed metallurgical coal mines in Queensland. In the opening presentation BHP Billiton’s newly installed coal head, Dean Dalla Valle proclaimed that capital expenditure would soon peak that that the company has “no new major projects planned”. For investors wary of big spending projects when coal prices are falling, it seemed like good news and was widely reported.
But, as always, the devil was in the detail.
While a map in Dalla Valle’s presentation listed the IndoMet Coal Project in Kalimantan in Indonesia as part of BHP Billiton’s portfolio of coal projects, there was little else. A table on the company’s coal resources listed the project as having 83 million tonnes of measured resources and another 690 million tonnes of indicated and inferred resources, so the project is potentially a big one. But there was no discussion of it at all in Dalla Valle’s presentation notes or those of his colleagues.
Nor does the project rate a mention in any of BHP Billiton’s three most recent quarterly exploration and production reports (see here, here and here. Even the company’s 2012 annual report – which indicates the company has a 75% stake in the project – was rather cryptic. After a little background information on the project, the company states (see page 37) that “study work is underway to identify development options across our CCoWs[Coal Contracts of Work] and early work on infrastructure development has commenced”.
BHP Billiton’s 25% Indonesian partner in the IndoMet project, Adaro Energy, is more forthcoming. In its most recent investor update the company states that it is “on track to begin mining from the Haju mine in the third quarter of 2013”.
So why is it that a mine which is being commissioned later this year is not even mentioned by its largest joint venture partners to investment analysts? After all, back in late 2001 it was reported in The Australian that the IndoMet Coal Project would cost $US1.34 billion and “could be producing five million metric tonnes of coking coal annually by 2017”. Taking the report at face value, it seems that the total project could be large.
A BHP Billiton PR officer stated in an email that the Haju mine project would cost the company $80 million and would produce 1 million tonnes of coal a year from early 2014. What exactly it will produce is less clear. In its annual report (see page 74) BHP Billiton indicates that the Haju mine has measured resources of 11 million tonnes of metallurgical and thermal coal, though it provides no detail on what the split between them is.
Why BHP Billiton has disclosed little about the project to shareholders and investors is mystifying. Perhaps it is that $80 million and a million tonnes of coal a year is not considered to be a “major” project by the company’s standard. Or perhaps it was decided that the development of a new project – and especially one in Indonesia – is exactly what investors don’t want to hear about. After all, in her presentation to the analysts BHP Billiton’s Vice President Marketing Coal, Vicky Binns, had flagged that the development of metallurgical coal projects in Mongolia and Mozambique had “proven challenging” given their “risk and capital intensity’. It was a veiled swipe at companies such as Rio Tinto and Vale and one that would have been undermined – at least on the risk front – by talking about a new project in Indonesia when what the BHP Billiton executives wanted to talk almost exclusively was projects in Australia.
Bob Burton is a Contributing Editor to the CoalSwarm wiki and co-author – with Guy Pearse and David McKnight – of the forthcoming book Big Coal: Australia’s dirtiest habit (New South Books, August 2013).