BHP reveals big cost blowout for Worsley expansion

UPDATE 12.35pm: Mining giant BHP Billiton has become the latest company to reveal a big cost blowout on a major project - its Worsley Alumina expansion near Collie.

The company now estimates its share of the project will cost nearly $US3 billion, up $US800,000 on the previous estimate of $US2.2 billion.

BHP warned investors in January the cost of the project was under review and was likely to be significantly higher.

First production has also been pushed back from June 30 to the first quarter of calendar 2012.

The project involves the development of the Marradong mine, refinery expansion and connection to a multi-fuel cogeneration unit.

BHP Billiton chief executive non-ferrous, Andrew Mackenzie, said the US$2.86 billion, 1.1 million tonne per annum refinery expansion was being executed within the existing footprint of the facility, making it one of the most complex brownfield projects undertaken.

"Such complexity 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," he said.

"Upon completion of the Worsley efficiency and growth project, the refinery will have the capacity to produce 4.6mtpa of smelter grade alumina, confirming Worsley as one of the world's leading alumina refineries.

"We remain confident that the project will add value to the business over the medium to long term as it delivers low cost production into a fundamentally strong market."

Worsley Alumina is a joint venture between BHP Billiton (86 per cent), Japan Alumina Associates (Australia) (10 per cent) and Sojitz Alumina (4 per cent).

The companies approved Worsley's expansion in 2008 following years of planning.

BHP shares were up 36 cents to $42.40 at $12.35pm.

The West Australian

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